Valuation dispersion

The high dispersion of valuations between markets and sectors allows us today to build a portfolio of high-quality businesses at prices that we consider very attractive.

"Valuation Spread": Top quintile valuation vs. average valuation, standard deviations from average.

One hint of how fading value style dominance could play out in the broad indexes lies in the banking industry, a group that has seen a "Valuation Spread": Top quintile valuation vs. average valuation, standard deviations from average.

We continue to find the most attractive opportunities in areas where valuation dispersion, negative sentiment and narrative pressure are creating what we believe to be attractive long-term risk/reward.

The degree of valuation dispersion between sectors is, however, as diverse as we have ever seen it, with AI and other technology-related sectors doing the bulk of the heavy lifting.

Valuation dispersion, concentrated market narratives and investor willingness to extrapolate near-term pressures continue to create the behavioural extremes the Strategy is designed to exploit.

We believe uncertainty surrounding inflation, interest rates, geopolitics, and technological disruption has contributed to unusually wide valuation dispersion across international markets.

In a market in which certain companies and sectors trade at all-time highs, the dispersion of valuations is enormous.

Geographically, we continue to find opportunities across Europe and select emerging markets, while maintaining the Fund’s underweight to companies domiciled in the U.S. We believe uncertainty surrounding inflation, interest rates, geopolitics, and technological disruption is contributing to wide valuation dispersion across global markets.

Despite tight spreads, the level of valuation dispersion is material, and the current opportunity set is material for our strategy.

Valuation spreads between the two have been extreme in recent years, indisputably so in our view.

Beyond major drawdowns, the strategy’s combination of long and short positioning benefits most from market environments characterised by broad valuation dispersion, ultimately aiming to deliver a portfolio with low correlation to the benchmark.

As the chart below illustrates, the valuation spread between the highest-quality companies and the broader market has compressed to multi-decade lows.

Currently, the “Magnificent 6” megacap tech stocks (AAPL, AMZN, GOOG/L, META, MSFT and NVDA) trade at an average ~10% premium forward P/E ratio relative to the S&P 500 – a historically tight valuation spread for this group.

LETTER TO INVESTORS: JULY 2026 | EQUITIES GLOBAL 12 Valuation dispersion — difference between the projected P/E of S&P 500 stocks in the 20th and 80th percentiles (gray area) and the median P/E of the index (line).

Valuation spreads between market leaders and small caps remain near historic extremes.

Index concentration, valuation dispersion and the market’s willingness to extrapolate dominant narratives have created an environment where we observe plenty of the behavioral extremes the strategy looks to exploit.

As always, our positioning is driven not by macro forecasts, but by ownership of high-quality businesses aligned with structural domestic growth, while also taking advantage of valuation dispersion during periods of volatility.

Opportunity in small/mid caps: Valuation spreads are wide, investor positioning is light, and improving earnings create a setup for continued market broadening.

At the same time, defensive and dividend-oriented sectors – now at multi-decade lows in index weight and investor interest – trade at unusually attractive relative valuations, with the Growth-to-Value valuation spread near historical extremes.

With the valuation spread between large cap growth and small cap value near historical extremes, we believe we are still in the early innings of what could be an attractive small cap value outperformance cycle!

Valuation dispersion favors active stock selection beyond mega-cap growth.

Beneath the surface, we may be witnessing the early stages of a reversal of a trend that has been in place for a long time and has led to the current wide valuation spread between the US and the rest of the world.

Overall, our fourth-quarter activity reflects a disciplined approach to portfolio construction as market leadership broadens and valuation dispersion increases.

We believe these actions will narrow the significant valuation spread between the modest valuation for CWK and its peers.

As the valuation spread expanded during the last 10 years, our view was that the greater the spread was, the harder it would be to maintain it.

As of June 30, the value index traded for 16.8X FY1 estimated earnings per share, compared to the growth index’s 33.1X. This 16-point valuation spread compares to average and median spreads of 10 points and 7 points based on data since 1998.