Characterizing Value and Growth Investing in Institutional Portfolios

Using a unique money manager database that allows managers to identify their own investment styles, we examine 4,754 non mutual fund value- and growth-oriented portfolios over the period 1999-2003. Consistent with style definitions, we find that on average, growth funds have price-earnings ratios, price-to-book ratios and earnings growth rates that are twice as large as those for value funds. We find that large and mid-cap value funds hold stocks of companies with significantly higher financial leverage than those held by growth funds. We measure style adherence relative to Russell indexes as well as the funds' own benchmarks, and find that large cap funds tend to stay closer to their own benchmarks