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Hedge Clippings | 27 February 2026 Wednesday's January monthly CPI figure, which came in at an annualised 3.8%, unchanged over the previous month, was not the news that either Jim Chalmers or Michelle Bullock would have wanted, nor, for that matter, anyone with a mortgage. Worse still was the trimmed mean result, the RBA's preferred inflationary measure, which edged up to 3.4% from the previous month's result of 3.3%. Amongst the details, but certainly not hiding, was an increase in electricity prices of over 32%, up from 21% in the previous month, and various government subsidies and handouts expired. Chalmers will be hoping that the effects of the RBA's rate rise earlier this month will kick in quickly, although it probably won't come quickly enough for the February number, due out on the 25th of March to have any influence on the RBA when they meet the week before. It's looking decidedly as if inflation of 3-4% is in danger of becoming entrenched, so the decision for Bullock and her board will hinge between biting the bullet and hiking rates again - either in March, and if not then in May - or hoping for the best. Unfortunately, "hope is not a strategy", and history indicates that rate rises seldom occur in isolation. What must now be clear to the RBA, albeit with the benefit of hindsight, is that they moved too soon - or too quickly, or both - when cutting rates three times last year. Moving on... There has been renewed focus recently on the benefits or otherwise of "active" fund management, compared with "passive" management via an index or ETF. The case for passive seems simple on the surface: Why pay "active" fees when the returns of the average fund struggle to exceed the index, or the low fee ETF, which tracks the weighted average return of all companies in the index? The argument becomes more compelling in times of strong equity markets, when the underlying market (and therefore the ETF) is, or has been, providing above long term average returns. For instance, in the Australian small and mid-cap space, the average 12-month return in AFM's Peer Group of 99 funds to the end of January was 13.38%, against the S&P/ASX Small Ordinaries Index of 22.75%, although the result was closer over 3 years at 11.62% and 12.08% respectively, and almost level pegging at 7.77% and 7.48% over 5 years. The data covering large-cap funds vs. the ASX 200 is similar, although returns from the smaller end of the market are significantly higher. The problem or catch is the term "average". Just as the index comprises companies that have performed significantly better (and in some cases many times) or worse than the market average, the same goes for managed funds. In the small mid-cap space, more than 10% of the funds returned over 30% (after fees), with the top 2, Aliwa Alpha, and SGH Emerging Companies, both returning over 50%, or double the index return of 22.75%. Over 3, 5, and 7 years, the same trend is apparent. This applies across all equity peer groups. Manager and fund selection are critical to performance. Equally critical is the consistency of performance, as well as, when it occurs, the length and depth of any negative returns or drawdowns. Taking a single year or term, particularly looking through the rear-view mirror seems simple, and can be misleading and dangerous. For clear analysis of fund performance and risk across all peer groups, log on to FundMonitors.com to compare funds using our quant Star Ranking analysis across any of 16 different peer groups. Choose funds with a consistent rank of five, four, or even three stars across multiple time frames - particularly 5 or 7 years if applicable, to select an above "average" return. News | Insights Manager Insights | East Coast Capital Management 2025 Responsible Investment and Stewardship Report | 4D Infrastructure Property Update | Australian Secure Capital Fund January 2026 Performance News Bennelong Emerging Companies Fund DAFM Digital Income Fund (Digital Income Class) Insync Global Capital Aware Fund |
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