Perpetual on top in small cap review
Perpetual Investmentshas emerged as the strongest smaller companies fund manager inMorningstar’s new Australian Equities Smaller Companies qualitative sector strength ratings.
The new research is part of Morningstar’s qualitative Business and Management Strength ratings series, which debuted in October last year.
Morningstar’s enhanced qualitative research uses ‘best practice’ benchmarks, together with a forward-looking view, against which fund managers are assessed. The outcome is a Sector Strength Rating which is then combined with the Business and Management Strength rating to make up a fund’s overall Qualitative Rating.
The QI Rating is then combined 50:50 with funds’ risk-adjusted Quantative Ratings, to calculate the Morningstar Star Rating for a Fund.
Discussing the outcome of its research, Morningstar says Perpetual Investments had been the strongest smaller companies fund manager, with the most positive overall outlook. Perpetual had been followed byInvesco,JBWereandAMP.
However it says that style did not appear to have a strong correlation with benchmark outperformance in small companies funds management, with only three small companies fund managers having distinct styles - Perpetual (value), JBWere (growth) andChallenger(style neutral).
Morningstar said stockpicking in small companies was paramount because, with only small teams, reliance was placed on individual portfolio managers. This, in turn, produced ‘key person risks’ that could affect future performance.
Looking forward, Morningstar said several fund managers had experienced major team changes which might improve some of the weaker performers such asMacquarieandING.
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