Funds struggling to maintain outperformance
Only 14% of ‘top-quartile’ Australian active funds have managed to consistently retain this rating over three years, according to S&P Dow Jones.
Latest data from the index provider to December 2019 found 14% of top quartile funds retained that rating over three years and only 1% retained it over five years.
Funds in the Australian real estate investment trust (AREIT) equity sector were least likely to remain in the top quartile over three years while Australian fixed income funds were most likely.
Across all fund sectors, only 15.8% of funds consistently beat their benchmarks over three years and 1.3% over five years. The most-consistent sector over three years was the Australian equity mid and small cap sector. For Australian equity funds, only 16 of the 145 funds which outperformed in 2017 continued to outperform in the subsequent two years.
Looking at outperformance over five years, of the 397 Australian funds which beat their benchmark in 2015, only five (1.3%) managed to repeat this outperformance over four consecutive years and there were no specific sectors which performed better than others.
S&P Dow Jones said funds that did outperform in the five-year period tended to have a lower liquidation rate in the subsequent five years across all categories.
Out of the 167 Australian funds which were top-quartile in the five-year period ending December 2014, only 15% of them were liquidated during the subsequent five years.
AUTHOR
Laura Dew
Recommended for you
Outflows from an Australian private markets fund manager have caused FUM at Pacific Current to decline by $1 billion in the last quarter.
Former RIAA chief executive Simon O’Connor has joined the ethical advisory panel at U Ethical Investors.
Financial services leaders are “all cashed up with nowhere to grow” when it comes to M&A activity, according to Deloitte, with 90 per cent saying they have strong balance sheets ready for an acquisition.
As fund managers are urged to diversify their product ranges, they are finding a faster way to do this is via an acquisition of existing firms but experts say it is not without potential culture clashes.
