Poor stock picks hit Macquarie global equities fund

The relatively weak performance of large cap stocks and some poor decisions on individual stock selection have led researcher Morningstar to rate Macquarie’s international equities strategy as ‘investment grade’.

The researcher noted the fund, which is managed by Lazard Asset Management, had the highest average market cap strategy of managers covered by Morningstar, but while the researcher admitted underperformance of large caps had contributed to the fund’s poor result, other factors were said to have led to the rating.

The researcher criticised the fund manager for favouring the financial services sector, which lagged in performance during 2005 due to interest rate concerns. And while the fund’s overweighting in Japanese stocks was considered a plus, the researcher noted individual selections such as holdings in Nissan Motor, which was hit by rising input costs, had backfired.

Positives for the fund were its consistent investment approach, experienced management and low staff turnover.

“After taking out Macquarie’s favourable currency calls, this strategy is by no means best in class,” Morningstar head of research Justin Walsh said in a recent research report on the fund.

The strategy gained only 6.71 per cent for the three years to November 30, 2005, compared with a 6.87 per cent rise in the average wholesale international equities offering during the same period.