Value investing faces pressure from momentum market trends

Value investing is facing significant challenges as it struggles to compete with momentum and passive investment flows. Data from the ten years ending July 31, 2026, shows the MSCI World Value Index delivered an annualized return of 11.0%, trailing both the MSCI World Index at 13.3% and the MSCI World Momentum Index at 15.2%.

Terry Smith, CEO and CIO of Fundsmith, has acknowledged the difficulty, noting that he will begin incorporating the momentum factor into investment selections for the Fundsmith Equity Fund. This shift follows a challenging first half of 2026, during which the fund returned -2.9%, while its equity comparator gained 11.2%.

To address these performance fluctuations, Smith has increased the rate of portfolio rotation. Recent disposals included major holdings such as Unilever, Novo Nordisk, and LVMH, which were replaced by investments in sectors including power infrastructure, payments, and streaming.