Over the past six months European growth stocks as defined by MSCI have outperformed European value stocks by 8%.
In addition, while most investors do not expect positive returns from equity investments ,European growth stocks have managed to deliver positive returns of 3% over the past two years, while the broad MSCI Europe Index and the value index are both down 12%.
A focus on companies with sustainable growth, high return on capital and strong competitive positioning has delivered better performance since 2009, Fitch said.
For example, European equity funds classified as "growth" by Lipper have outperformed the broad European equity Lipper Global fund category by 14% over the past three years.
"This performance difference is explained by the structural trends at play. Fitch previously identified four critical factors that have a direct implication for stock-picking: low growth prospects, the sovereign crisis, globalisation and disruptive innovation," Aymeric Poizot, managing director in Fitch’s fund and asset manager rating group said.
"In this context, quality growth remains a scarce asset, while value managers are threatened by ‘value traps’ – stocks stuck at a discounted price," he continued.
Fitch said as a consequence of this changing returns landscape, stock-picking processes are also changing, with valuation criteria playing less of a role and sustainable growth based on solid competitive advantage taking centre stage.
