Why these funds are racing ahead of rivals and the wider market

Over three time periods – one, three and five years – most UK and global funds that focus on value shares have outperformed peers.

The research, by interactive investor, shows how value investing has experienced a renaissance after more than a decade in the wilderness when interest rates were at rock-bottom levels.

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During that period, growth shares comfortably outpaced value shares. This has largely been attributed to low interest rates, which made growth stocks more alluring, as the expected future earnings of such companies were more attractive when measured against the low cost of borrowing.

But higher interest rates are a more favourable market backdrop for value strategies. Rate rises have led to an increase in stock market volatility, causing investors to dial down on risk. As a result, the market direction switched, with investors becoming more mindful of valuations and prioritising companies making money today and paying dividends.

Most funds with “value” or “recovery” in their name invest in value shares, while some “special situations” funds also follow the value approach.

In the two tables, which is not an exhaustive list, there are 15 UK value funds and 12 global value funds.

Before we delve into the data, let’s first explain what value investing is.

The value approach explained

The value investment style involves picking stocks that appear to be trading at prices lower than their true value, including how much money they make and how much excess cash is being generated. Such out-of-favour companies tend to have a low price/earnings (PE) ratio, which compares a company’s value with its profits. If the company pays dividends, it will likely have a high dividend yield.

Such companies tend to be found in sectors that are more economically sensitive, including finance, energy, and materials. Value stocks are cheaper than growth stocks, with valuations more reflective of current earnings than future potential.

Fund managers who hunt for value shares don’t simply buy on valuation grounds alone. They also look for, and hope for, a catalyst to revive an under-priced company’s financial fortunes. This could be a restructuring, refinancing, or management change.

Value fund manager Alex Wright, who oversees Fidelity Special Values (LSE:FSV), says: “A company being cheap is clearly the first thing we look for. So, companies that are unloved and were an issue either on a sector level, so in the industry that the company operates in, or [in the sense that] the company itself is clouding people’s judgement about why it is actually a valuable company. Often that is that the short-term financial performance is poor, and we think it can turn around.”

Wright recently appeared in interactive investor’s Insider Interview video series. You can watch via the two links provided below.

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UK value fund comeback

Value sectors, such as oil, gas, miners and banks, comprise a large part of the FTSE 100. Given this is the case, it’s not a surprise to see that in terms of funds and investment trusts, the UK has more value fund options than other markets.

Of the 15 UK value funds examined, all outperformed the UK All Company sector average return over five years, while 14 were ahead of the pack over three years. Versus the wider market – the FTSE All-Share index – 12 outperformed over five years and 10 gained an edge over three years.

However, as the data shows, there’s a considerable gap between the best performers and the rest of the field. Over five years, eight funds have more than doubled investors’ money, with Temple Bar (LSE:TMPL) nearly trebling returns, up 195.1%.

Its fund managers, Nick Purves and Ian Lance, invest in good quality companies that they believe are unjustly out of favour. The duo focus on financial strength – strong cash flows and robust balance sheets – to avoid “value traps”, companies that are cheap for a good reason due to structural decline.

Temple Bar co-manager Ian Lance also recently took part in our Insider Interview video series. You can watch these interviews via the links below.

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The next best performers over five years, up 157.9% and 144.2%, are Ninety One UK Special Situations and Fidelity Special Values.

The others in the 100%-plus club are: Dimensional UK Value, Schroder Recovery, abrdn UK Value Equity, Fidelity Special Situations, Redwheel UK Value and Merchants Trust (LSE:MRCH). 

It’s worth noting that Schroder Recovery has recently experienced a high-profile departure, with Nick Kirrage, its co-manager and head of Schroders’ global value team, leaving the group in July after more than two decades at the group.

Over one year, 12 of the 15 returned more than the sector average, while eight outperformed the FTSE All-Share index.

The financials sector, which we covered last week, has been a key driver of performance for many value funds. In particular, bank shares have soared amid higher interest rates.

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Source: FE Analytics. Data run to 12 September 2025. Past performance is not a guide to future performance.

Global value funds

Of the 12 global value funds, all of them outperformed the sector average return over three and five years. When pitted against the MSCI World index, six of the 12 produced higher returns over three years, and 10 of the 12 produced higher returns over five years.

Over one year, 11 of the 12 are ahead of the sector average and the global index.

Many of the global value funds have been reducing exposure, or have a longstanding underweight position, to the US stock market. The MSCI World Index, which follows the ups and downs of 1,320 global stocks across 23 developed markets, holds 72% in US companies.

Despite the US stock market recovering its poise over the past couple of months and shaking off sharp losses incurred earlier this year in response to the emergence of US tariffs, being light on the US has been beneficial for UK investors over the short term due to US dollar weakness. This has the effect of lowering returns for UK investors in US funds and global funds that hold a large proportion in the world’s most influential stock market.

Another key difference is that global value funds tend to look for opportunities in Asia-Pacific and emerging market regions. In contrast, it’s not uncommon to see other global funds sticking to opportunities in developed markets.

Over five and three years, the best performer is Ranmore Global Equity, which is also second in the rankings over one year. It’s light on US exposure (with around a 20% weighting). 

Andrew Lapping, chief investment officer at Ranmore Fund Management, says this year the fund has reduced its exposure to Western markets in favour of larger holdings in Asia, with the South Korean stock market one area highlighted.

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In second place over three and five years, while claiming top position over one year, is Artemis Global Income. It is also light on US exposure, holding just under one-third of its portfolio in the country. The Artemis fund launched 15 years ago, and the same stock picker – Jacob de Tusch-Lec – remains at the helm. 

Along with Ranmore Global Equity and Artemis Global Income in the 100%-plus club over five years are: Ninety One Global Special Situations, Schroder Global Recovery and Murray International (LSE:MYI).

Two exchange-traded funds (ETFs) that invest in an index containing a selection of value companies rank in the middle of the 12 funds over the three time periods. They are iShares Edge MSCI World Value Factor ETF (LSE:IWFV) and Xtrackers MSCI World Value ETF (LSE:XDEV).

One value fund manager not featuring on the list is Ben Whitmore of Brickwood Asset Management. The veteran value investor recently left Jupiter Asset Management to set up his own fund manager to run two value funds: TM Brickwood UK Value and TM Brickwood Global Value.

As both funds are new, they don’t have much of a track record. However, between them, Whitmore and co-managers Kevin Murphy and Dermot Murphy have more than 60 years of dedicated value investing experience.

Whitmore was also recently interviewed by interactive investor. You can watch these interviews via the links below.

• Shares I’m backing to play the UK value revival
• Value veteran on banks, defence, and an undervalued sector

Source: FE Analytics. Data run to 12 September 2025. Past performance is not a guide to future performance.

Portfolio tactics 

As ever, with active funds it’s important to look under the bonnet and understand how the fund invests and what it’s seeking to achieve. Take a look at the fund factsheet, which is a two or three-page document giving a quick overview of a fund’s performance. It will also explain where the fund is currently investing, the top 10 holdings, and other key information.

Among the things to consider is fund manager tenure, so how long the manager or management team have been in their respective posts.

Those two tips our among 10 tactics recently covered in our weekly On The Money podcast. Discover the other tactics private investors should look for when researching funds here.

• 10 tactics when researching funds, investment trusts and ETFs
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Mix and match between fund styles

Realistically, any potential prolonged market rotation towards value is unlikely to go in a straight line.

As ever, balance is key and it’s prudent to mix and match between growth and value strategies. Doing so helps investors achieve greater levels of diversification.