Active managers are making the right calls
Making the right geographic and sector calls has helped active managers outperform the benchmark over the last 12 months, according to Zenith Investment Partners.
The research house's latest global equity report found performance for the MSCI World Index ex-Australia for the 12 months ending 30 September 2015 was 18.9 per cent, and 24.4 per cent for the three year period.
Zenith global equity analyst, Quan Nguyen, said the significant increase in the level of performance dispersion in the markets at a sector and geographic level helped active manager outperform.
"Greater performance dispersion has meant there have been greater opportunities for active managers to add value through stock selection and portfolio construction, and active managers have taken advantage of the situation," Nguyen said.
"Although the majority of actively managed funds employ a bottom-up stock selection approach, the key to outperformance has been making the right calls in certain geographies and sectors."
Nguyen said the right calls were being overweight in North America relative to the rest of the world, overweight in developed markets relative to emerging markets, and being overweight in the consumer, information technology, and healthcare sectors relative to the energy and materials sector.
"While the long-term analysis shows value outperforms growth, in recent times we have witnessed growth style managers generally outperforming their value style counterparts. We believe that has been driven by the continued outperformance of particular segments of the market that are typically associated with the growth style of investing," he said.
"On the flipside, sectors that value style managers typically hold or top up on weakness have continued to underperform."
Nguyen noted that investors should not underestimate the importance of blending both growth and value styles to achieve a more balanced and consistent set of outcomes.
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