Value investing has experienced a challenging period, with value stocks underperforming the broader market over the last decade. The MSCI World Value Index recorded an annualised return of 11.0% in the 10 years leading up to 31 July 2026, while the MSCI World Index achieved 13.3% during the same timeframe.
Momentum investing has been a more dominant factor, with the MSCI World Momentum Index outperforming the main index over the past 10 years, delivering an annualised return of 15.2%. Veteran value investor Terry Smith, CEO of Fundsmith, acknowledged the rise of momentum investing in July 2026, stating he would begin to consider this factor more when selecting investments.
The underperformance of value investing is attributed to factors such as the rise of passive investing and the artificial intelligence (AI) investment boom. Passive funds, which are often market-cap weighted, have seen their share of the total investment fund market grow significantly, from 12.4% in January 2008 to 46.4% in July 2026, according to Morningstar data. This trend directs more money into the largest companies, potentially pushing their share prices higher irrespective of fundamental changes.
Cedric Jacque, an investment manager at Lloyd Capital, noted that the current market, combining the AI boom, strong momentum, and elevated valuations, shows similarities to previous late-cycle markets. However, Jacque believes that disciplined, bottom-up value investing remains the correct approach for long-term capital growth, arguing that passive investment growth could create more opportunities for patient value investors.