If you add a high degree of concentration into a global equity fund’s design, then ‘value’ often turns into ‘volatile’. But does higher volatility make it more or less risky for investors?
An easy challenge to levy at a high conviction, highly concentrated fund is that relying on just a handful of stocks increases a fund’s levels of risk.
Win Murray, a portfolio manager at Harris Associates, an affiliate of Natixis Global Asset Management, argues strongly that a global equity fund of 20 stocks may be more volatile but is not more risky as a result.
He argues that buying stocks that are discounted to what he feels they are worth is providing good value; paying more for a stock than he feels it is worth is increasing the risk.
