Global big shots missing the mark

Despite big reputations and even bigger funds under management (FUM), five fund managers did not deliver at the bi-annual recalculation of the FE Crown Ratings, instead slammed with low ratings.

The $2 billion-and-above funds from Macquarie, Platinum, Janus Henderson, Schroders and Dimensional all either dropped in ratings or remained the same at two-Crowns, suggesting perhaps size doesn’t really matter, or equate to good performance.

At $10.9 billion in FUM and the biggest fund with one of the lowest Crown ratings, Platinum International is perhaps the biggest disappointment.

It calls the ACS Equity – Global sector home, and produced returns of 12.96 per cent for the year to 31 July 2018, well below the sector average of 16.37 per cent.

As well, while the returns of the peer group dropped in the 6 months to last month’s end to 4.51 per cent, Platinum International fell into the negative with -2.80 per cent returns, and it’s not the only Platinum fund in the mix either, with Platinum’s $4.5 billion Asia fund similarly receiving a two-Crown rating.

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Platinum International’s co-portfolio manager, Clay Smolinski, said the fund had lagged in performance due to the portfolio’s 25 per cent weighting in China given the region produced stocks at attractive prices as a result of the macro issues affecting the market.

Smolinski said the declining rate of credit growth and the escalation of the trade war between the United States and China were two big factors that have contributed to the downturn in the Chinese market, but while it’s a “fairly large headwind” for the fund, Platinum sees it as “a great opportunity for investors” given stock prices are low.

“Most of our investment ideas are outside of the US market, so we’re in the rest of the world, and what we’ve seen is, year to date, those markets haven’t performed nearly as good as the US market,” he added.

Smolinski said the portfolio held net two per cent of stocks in the United States, but the US market makes up about 65 per cent of the benchmark and is doing very well.

While the same was true for Platinum Asia, the fund manager looked positive going forward.

“Amid fears of trade wars and policy mistakes in China we continue to see solid economic activity and good corporate earnings growth. Most importantly, we see outstanding value in many stocks in Asia,” the fund manager posted on their monthly factsheet.

It’s come in twos for Schroders as well with their $2.7 billion Fixed Income and $6.8 billion Real Return CPI Plus 5% funds also awarded a two-Crown rating.

Schroders’ head of product, Stephen Kwa, said the Real Return fund was benchmark unaware, but admitted that performance has lagged.

“What our investors want, particularly retirees, is some sort of return above inflation with the lowest possible volatility, and minimising that risk of loss,” he said. “That does have consequences, because it will mean that in some markets when equity markets rally hard, objective-based strategies like ours will typically lag our peer group.”

Kwa said that the upside of this is that when equity markets become more volatile, they’ve been able to protect on the downside, and deliver on their risk objective of lower drawdowns.

In terms of the fixed income fund, Kwa said the fund has lagged the Bloomberg Aus Bond Composite Index in recent years, but pointed that most active managers had similarly lagged the benchmark.

“We’ve actually been more conservatively positioned than the index with our asset duration, and as the bull market has gone on longer than anticipated, that’s meant that our returns have lagged the benchmark, but relative to peers we’ve done quite well.”

Macquarie’s $3.28 billion Income Opportunities fund and $6.8 billion IFP Global Franchise fund were both rated two Crowns as well, producing returns of 1.86 per cent and 14.58 per cent respectively for the year to 31 July 2018 as compared to the ACS Fixed Interest – Diversified Credit sector average of 2.07 per cent and the ACS Equity - Global sector average of 16.37 per cent.

Janus Henderson’s $3.16 billion Tactical Income fund and Dimensional’s $2.3 billion Five Year Diversified Fixed Interest Trust were the last of the big funds awarded a two-Crown rating.

Macquarie, Janus Henderson and Dimensional had declined to comment on the performance of their funds.  

Table 1: Biggest funds with the lowest ratings