Risk Conditions Benefit Growth Managed Funds in Sept Quarter

Risk Conditions Benefit Growth Managed Funds in September Quarter

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Morningstar today released managed fund performance league tables for the third quarter of 2012.

"Growth-oriented managed funds including Australian and international share funds surged during the third quarter of 2012," said Morningstar Senior Research Analyst Brook Sweeney. "Value-style large-cap share funds outperformed their growth and blend counterparts, because of their lower allocations to the volatile resources sector. Strong stockpicking helped Australian small-cap funds bounce back in the third quarter, while many fixed income funds also produced healthy results.

"However, the outlook remains cloudy. The US has difficult fiscal policy decisions to make, a number of Eurozone countries are only in the early stages of getting their deficits under control, and there's a risk that policy mis-steps could derail expected world economic growth. This all adds up to a more subdued outlook for growth assets and the funds that invest in them," Sweeney said.

Key Findings

• The median large-cap Australian share fund was up 8.68 percent in the September 2012 quarter. Value-style options once again outperformed their growth counterparts in aggregate. This was because growth-style funds tend to favour resources stocks, which did not perform as well as some other sectors over the quarter.

• Active small-cap fund managers proved their mettle over the September quarter, the median manager outperforming the S&P/ASX Small Ordinaries Index by 1.70 percentage points (up 8.95 percent), and also outpacing the average large-cap counterpart (which was up 8.68 percent). There was a wider dispersion of returns among the small-cap funds, which ranged from 18.0 down to 2.11 percent.

• International share funds had a strong September quarter, the MSCI World ex-Australia Index and the median fund manager both posting returns a notch above five percent. This was however meaningfully below the median large-cap Australian share fund's 8.68 percent return. Growth-style global share funds outperformed value. The rise in the $A against a number of other currencies meant that hedged funds generally did better than their unhedged counterparts.

• Australian listed property funds produced strong returns over the September quarter (6.43 percent), outpacing both global listed property (3.85 percent) and international equities (5.05 percent). Unusually, however, many global property funds outperformed the benchmark on a net of fees basis.

• Returns from inflation-linked bond funds spiked over the third quarter of 2012, following the surprise short-term inflationary uptick resulting from rising energy prices. Bonds generally rallied over the quarter, and funds with short duration and long credit positions generally fared best. Global bond funds with high exposures to credit risk did well, as yields compressed on the back of more positive market sentiment.

• Alternatives funds demonstrated clearly how diverse their strategies are over the September 2012 quarter, producing a wide dispersion of returns.

ENDS

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