Value Funds in Australia 2026: Performance, Trends & Opportunities

Value funds are managed investments that aim to buy shares trading below their intrinsic worth. Fund managers use fundamental analysis to identify companies with strong balance sheets, steady earnings, and low price-to-earnings (P/E) ratios. Rather than chasing the market’s hottest stocks, value funds seek out bargains, often among out-of-favour sectors.

• Classic value stocks: Banks, insurers, utilities, and established industrials.

• Investment approach: Buy undervalued, hold until the market recognises their true value.

• Popular Australian value funds: Perpetual Wholesale Industrial Fund, Lazard Select Australian Equity Fund, and the Vanguard Australian Value ETF (VHY).

Following a tough period for value investors through the late 2010s and the tech boom, the past two years have seen a significant rotation. Rising interest rates and a cooling tech sector have shifted investor sentiment. According to Morningstar’s 2026 Australia Equity Fund Report, value funds outperformed growth peers by an average of 2.4% over the past 12 months, buoyed by strong results from financials and resource companies.

• Resource sector rebound: Mining and energy stocks, classic value picks, benefited from global supply constraints and robust commodity prices.

• Banking sector resilience: The Big Four banks’ stable dividends and conservative lending practices insulated them from recent volatility.

• Moderating inflation: With the RBA’s cash rate holding steady at 4.35% in early 2026, value stocks with steady cash flows are seen as safer bets.

Meanwhile, growth-heavy portfolios have felt the pinch as tech valuations corrected and consumer discretionary sectors slowed.

Several regulatory and tax updates in 2026 are reshaping the landscape for value fund investors:

• Superannuation performance test: The latest APRA revisions have made it tougher for underperforming funds to attract new members, putting pressure on managers to deliver consistent value-style returns.

• ETF transparency: ASIC’s new disclosure requirements mean investors get better visibility into underlying holdings and fees for value ETFs, making comparison shopping easier.

• Dividend franking policy: The government maintained franking credits, preserving a key advantage for many value-oriented funds that focus on dividend-paying Australian shares.

These changes are generally positive for investors, encouraging greater accountability and transparency across the sector.

Value funds can be a smart addition for Australians seeking steady returns, lower volatility, and solid dividend income. However, their performance may lag during bull markets dominated by growth stocks. In 2026, with the ASX 200 trending sideways and volatility persisting, the case for value funds is stronger than it’s been in years.

Before investing, consider:

• Your risk tolerance: Value funds are less likely to deliver outsized returns in speculative booms, but offer stability in choppy markets.

• Investment horizon: Value investing requires patience—returns may take years to materialise.

• Fund selection: Compare fees, manager track record, sector focus, and recent performance. Use 2026’s improved disclosure rules to dig deeper.

For investors building a diversified portfolio, pairing value funds with growth or international funds can help balance risk and reward.

Value funds are enjoying a well-deserved resurgence in Australia, bolstered by changing economic conditions and new regulatory standards. While they aren’t a silver bullet, their focus on undervalued, dividend-generating companies makes them a compelling option for cautious investors—especially in a market that’s moved beyond the easy gains of the last decade. As always, align your fund choices with your long-term financial goals and risk profile.