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Printed: 07 July 2022 8:59 PM

News

23 Jul 2021 - Hedge Clippings | 23 July 2021
By: Australian Fund Monitors

    

Hedge Clippings | Friday, 23 July 2021

 

Many years ago Hedge Clippings used to wait with bated breath to hear the latest result of the Top 10 records on the hit parade. Nowadays of course he wouldn't know any of them, let alone listen to any of the current crop, even though he can still sing along to the songs of his youth. (Notice how there's no clue to the decades involved, and with good reason!)

But it goes to show that everyone loves 'top this' or 'top that' tables which, while they may change, never go out of fashion. The finance sector is no different, whether the focus is on individual equities, asset classes, superannuation funds, or in AFM's case, managed funds. As such, at the end of each financial year (and calendar year if it comes to that), this creates the opportunity to review the best performing funds in various categories.

But the 2020/21 financial year was one for the books. Not only did the ASX 200 Total Return Index record its 3rd best performance over the last 25 years, but it was also the first time since the 1996/97 financial year that the index had only one month of negative performance.

To put that into context, in the financial years between 1997 and 2021 the index averaged 5 negative monthly returns each year, with an average negative monthly return of -3.59%, coincidentally close to the only negative month last year, when in September the index recorded a negative -3.66%.

It probably comes as no surprise that 2020/21 was an extraordinary financial year given the world we live in, but it is worth digging deeper into the numbers to get a feel for how extraordinary it was.

  • In the year to June, the index returned 27.80%. Small and mid cap funds returned an average of 41.42%, compared to the large cap sector where the average was 29.1%.
  • The top 10 managers returned an average of 84.55%.
  • Funds in the highest quintile (or one fifth of the 160 relevant funds) returned an average of 60.16% for the year.

Exactly 100, or 62.5% of Australian based equity funds outperformed the ASX200:  

  • These funds out-performed by an average of 15.31%.
  • As might be expected, 87 of these were 'long only' leaving only 13 long/short funds that outperformed.
  • 7 funds returned positive returns each month.

Of the 60 funds that failed to beat the index:

  • The average return was 20.62%.
  • Only one fund failed to register a positive return (-2.94%).
  • 32, or 53% of the funds, were long only, leaving 47% of the 'underperformers' in the equity alternative category.

Clearly such short-term performance has to be viewed in a broader context, but the 2021 financial year will affect the longer term performance of all funds, investors and advisors' portfolios for some time. This should not be ignored when assessing managers, and while short term return tables are great for a manager's bragging rights, they are only part of the longer term picture.

For those interested in doing this sort of analysis themselves, we encourage you to explore our Custom Statistics tool. Watch this video for a short demo. 

And on that note, enjoy the locked-down weekend, and stay safe. Tune in to your favourite sounds, turn up the volume, and drown out the COVID news.


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