The Value reset: Rebuilding diversification through valuation discipline

For much of the past 15 years, markets have rewarded investors for paying less attention to valuation discipline. When rates were pinned near zero, the math rewarded long-duration growth. The further out the cash flows, the more “valuable” they looked when discounted at microscopic rates. But that environment was regime-driven, not permanent.

Today’s environment may increasingly look like one where capital is no longer free, discount rates matter again, and markets are less forgiving of “priced-for-perfection” narratives. Higher rates raise borrowing costs and can pressure equity valuations—particularly when the expected payoff is pushed far into the future.

Value investing isn’t a retro trade. It’s a modern way to rebuild margin of safety in portfolios that have quietly become dependent on perfect outcomes.

Why concentration risk matters more than investors think

Most portfolios are less diversified than they appear. A handful of stocks have swollen into an outsized slice of “core equity” exposure. That dynamic can persist for extended periods, but it can also reverse quickly. When the discount-rate world shifts, the downside can get just as concentrated.

Many seemingly diversified portfolios remain heavily dependent on the same macro drivers, such as low rates, low dispersion, and uninterrupted mega-cap dominance. Value is how you widen the return engine again.

Value isn’t “cheap.” Value is “mispriced.”

Value investing is often misunderstood as simply buying low-multiple businesses with challenged fundamentals. Real value investing is buying durable businesses where the market has become overly pessimistic—with the potential to benefit if expectations normalize.

Value investing is not inherently anti-growth; it emphasizes price discipline when evaluating future growth expectations. At its best, Value leans on three return drivers:

1) Cash flow today (not just hoped-for earnings tomorrow)

2) Re-rating potential (the market changes its mind on valuation)

3) Catalysts (events or fundamentals that close the valuation gap)

That’s why value complements growth. It adds different return drivers and reduces dependence on a narrow cohort of winners.

Why market conditions may be improving for Value

This is less about forecasting the end of growth leadership and more about recognizing a shift in market conditions. It’s about acknowledging a new set of constraints.

1) The “duration” problem is back

When rates were near zero, it was easy to justify paying extreme prices for distant cash flows. When rates rise, those future cash flows are worth less today, making high-multiple “perfect-story” stocks less forgiving.

2) Tightening cycles and uncertainty have historically been fertile ground

Value strategies do not necessarily require strong economic growth to perform well. They need expectations to reset and dispersion to widen enough that fundamentals matter again.

3) Narrow markets create wide opportunity sets

When capital crowds into the same names, mispricings tend to accumulate globally, in mid-caps, and in out-of-favour segments.

A disciplined way to incorporate value into existing portfolios

The mistake is viewing value as a binary choice—growth versus value, offense versus defense, winner versus loser.

In practice, value strategies are often most effective when used as a complementary sleeve and portfolio counterweight:

• If a portfolio is growth-heavy, value can help reduce exposure to duration risk and concentration risk.
• If a client worries about drawdowns, quality/defensive value can anchor outcomes in cash flows and balance-sheet strength.
• If a portfolio is overly U.S. mega-cap centric, global value expands the opportunity set beyond the most crowded trade.

The goal isn’t to win a style debate. It’s to build a portfolio that can survive a regime where the price of capital isn’t free and market leadership isn’t guaranteed.

The Mackenzie edge: two distinct approaches to value investing

The current market environment may create a broader opportunity set for value-oriented strategies, but successful implementation requires more than simply buying low-multiple companies. It requires a disciplined investment process, broad research capabilities, and a clear valuation framework.

Mackenzie provides access to two distinct value-investing approaches through ETF solutions—each designed to navigate different market and valuation environments while offering investors flexibility beyond a single definition of value investing.

Barrow Hanley: Mackenzie Global Value ETF (MAGV)

A disciplined, bottom‑up approach rooted in deep fundamental research, focusing on companies with strong financial characteristics trading at a discount to intrinsic value. The strategy seeks to identify durable businesses that are out of favor, misunderstood, or facing temporary headwinds, with a clear path to normalization over time.

Portfolio Implications: A time‑tested value approach intended to perform across full market cycles, with a focus on valuation support, balance sheet strength, and risk awareness—offering a differentiated complement when portfolios are concentrated in higher‑valuation growth exposures.

Putnam: Mackenzie US Value ETF (MAUV)

An active, fundamentally driven approach that seeks attractively valued companies with durable earnings potential and catalysts for improvement. The portfolio draws on Putnam’s deep research platform to identify opportunities where market expectations appear misaligned with a company’s long‑term outlook.

Portfolio Implications: A pragmatic way to harvest valuation gaps inside the world clients already own, while reducing the risk of “cheap for a reason.”

The bottom line

If the previous market cycle rewarded duration and multiple expansion, the next phase may place greater emphasis on valuation discipline and fundamentals.

Concentration is high, leadership is narrow, and the cost of capital is no longer trivial. Value strategies can help restore diversification—not only across holdings, but across underlying return drivers.

To capture this opportunity, you can work with your Mackenzie sales team to diagnose where concentration and duration risk sit in client portfolios, choose the right implementation approach (traditional value vs. relative value; global vs. U.S.), and implement it using Mackenzie’s ETF solutions backed by our differentiated ETF product lineup.

Commissions, management fees, brokerage fees and expenses may all be associated with Exchange Traded Funds. Please read the prospectus before investing. Exchange Traded Funds are not guaranteed, their values change frequently and past performance may not be repeated. 

Index performance does not include the impact of fees, commissions and expenses that would be payable by investors in the investment products that seek to track an index. 

The content of this article (including facts, views, opinions, recommendations, descriptions of or references to, products or securities) is not to be used or construed as investment advice, as an offer to sell or the solicitation of an offer to buy, or an endorsement, recommendation or sponsorship of any entity or security cited. Although we endeavour to ensure its accuracy and completeness, we assume no responsibility for any reliance upon it. 

This article may contain forward-looking information which reflect our or third-party current expectations or forecasts of future events. Forward-looking information is inherently subject to, among other things, risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed herein. These risks, uncertainties and assumptions include, without limitation, general economic, political and market factors, interest and foreign exchange rates, the volatility of equity and capital markets, business competition, technological change, changes in government regulations, changes in tax laws, unexpected judicial or regulatory proceedings and catastrophic events. Please consider these and other factors carefully and not place undue reliance on forward-looking information. The forward-looking information contained herein is current only as of May 31, 2026. There should be no expectation that such information will in all circumstances be updated, supplemented or revised whether as a result of new information, changing circumstances, future events or otherwise.