Our services in the selected location:
  • No services available for your region.
Select Location:
Remember my selection
Your browser is out of date. It has known security flaws and may not display all features of this and other websites

April 21, 2020 | GSAM Connect

Breaking from Tradition: In this Bear Market, Growth Outperformed

This year’s equity bear market has been an equal opportunity one: managers across all regions have suffered. But some have suffered less than others.

An analysis of recent returns shows that the majority of international (non-US) growth funds managed by active managers are beating their benchmarks, net-of-fees. This is an improvement over performance in previous drawdowns.

In addition, growth managers had a higher success rate of beating the indices than value managers and delivered higher absolute returns. That was something of a surprise, as investors have grown used to seeing value strategies provide more wealth-preservation in times of stress

International Active Manager Excess Return During Drawdown

Breaking from Tradition

Source: Morningstar Direct, GSAM as of 4/15/2020. Drawdown periods are defined by when S&P 500 Index had the largest drawdown. International Active Managers are referred to 394 non-index mutual fund products in the Morningstar Foreign Large Blend, Foreign Large Growth and Foreign Large Value categories. The drawdown periods are defined by S&P 500 Index’ largest drawdown. “2007-2009” refers to 10/10/2007 – 3/9/2009. “2011” refers to “4/30/2011 – 8/8/2011”. “2018” refers to 9/21/2018 – 12/24/2018. “2020” refers to 2/19/2020 – 3/23/2020. Excess return is calculated versus the primary prospectus benchmark of each fund.

Past performance does not guarantee future results, which may vary.


In our opinion, investors today are most concerned about the structural challenges facing areas that tend to be more heavily driven by a value style. For example, the energy sector, which is the worst performing across all sectors both in and outside of the US, is more significantly represented in value indexes. 

If these challenges persist, what may seem like an anomaly today may become a persistent trend tomorrow.

This pattern was not limited to international managers. Returns for US large-cap and small-cap managers showed a similar pattern of growth managers outperforming value ones at a higher rate, with higher absolute returns. In the recent bear market, fewer than half of the value managers beat their benchmark while more than 65% of growth managers did. On average, growth managers outperformed value managers by 6%.

Less surprisingly—but just as importantly—the balance sheet strength of the companies in each strategy also affected performance during the downturn. The worst performing growth managers in both US and international markets generally had lower quality exposure. Those with higher correlations to the quality factor — investing in companies with a high return on equity, stable year-over-year earnings growth and low financial leverage — did better.

Given the uncertain nature of the current environment, we believe companies that have the financial wherewithal to withstand a few quarters of lower revenues, earnings and cash flow are also the most likely to emerge as market share leaders.


Stay posted on the latest market developments and key themes for your portfolios and practices.
Get Connected