Crown ratings – fortune favours the fortunately-diversified
Strategic stock selection combined with appropriate diversification and a modicum of luck represented the keys for the fund managers who emerged best in the latest quantitative FE/Fundinfo Crown Ratings rebalance covering the past six months.
While much could be said for index-hugging over the period, the fund managers who were most rewarded were those with strategies which best accommodated the ongoing volatility.
FE/Fundinfo Crown Ratings are a quantitative rating determined using FE’s performance scorecard process which analyses a fund’s performance over the last three years. The score is made up of three components – alpha, relative volatility, and consistently good performance.
Three asset management firms saw significant upgrades to their funds over the period - AMP Limited’s IPAC Asset Management, Zurich Financial Services and Resolution Capital.
On the downside, market conditions did not suit the strategies of six of the managers over the period.
Morningstar Investment Management Australia, IOOF Investment Management, Colonial First State (CFS), Pengana Capital, Colonial First State Global Asset Management (CFS GAM), and Australian Unity emerged as having the most five Crown downgrades.
The manager that lost the most five Crown ratings was Morningstar at seven funds, followed by IOOF at five, CFS at four, and Pengana, CFS GAM, and Australian Unity all at three.
However, as CFS general manager for investments, Scott Tully pointed out, it was very much a case of whether the underlying strategies of the funds had been suited to the prevailing conditions.
Tully pointed to the performance of the CFS Multi-Index Balanced and Multi-Index Moderate Funds and acknowledged that their tilt to value had resulted in performance lagging global indices at a time when US technology stocks had been particularly strong.
He pointed out that, at the same time, the funds had remained overweight to emerging markets in the expectation of relatively stronger returns in the future.
Recommended for you
BlackRock, in collaboration with iCapital and GeoWealth, has unveiled a model portfolio that delivers access to both private and public market assets in a single account, following adviser demand.
Magellan has confirmed the new leadership of its active infrastructure ETF once head of investment, Gerald Stack, exits in July.
Vanguard has indicated it is actively trying to meet the demand for international ETFs with its next ETF launches sitting in this space.
Dubious marketing strategies involving financial advisers are among reasons that research house SQM Research has put the private credit space on alert.
