Only a minority of Australian equity fund managers beat the market index last year and even fewer were able to produce positive returns.
It was not a good year to be invested in the small caps or microcaps, long-short equity managers could not take advantage of short-selling opportunities and equity income managers gave up capital to produce income for investors.
The S&P/ASX 200 Accumulation Index fell 2.8 per cent last year. Here’s how Australian equity managers in the Mercer Investment Survey fared.
Long-only funds. The median return for the 93 long-only Australian equity managers in the Mercer survey was a loss of 4.2 per cent for the 12 months to the end of December. Only 11 funds produced a positive result.
The top-performing long-only funds over 12 months were Panther Trust Australian shares, which was up 5.6 per cent, Selector High Conviction Equity Fund (up 5.5 per cent), Platypus Australian Equities (up 3.9 per cent), Colonial First State concentrated Australian Share Growth (up 2.9 per cent) and Bennelong Core equities (up 2.4 per cent)
Long-short funds. It should have been a good year for long-short managers, who seek to take advantage of falling share prices by short selling stock, but long-short funds did worse than long-only funds. The median return for the nine funds in the Mercer survey was a loss of 4.3 per cent.
No long-short fund in the Mercer survey produced a positive return. The top performer was Invesco Australian Equity LS 130/30, which had a zero return.
Income oriented Australian equity funds, which have bigger holdings in high dividend paying stocks, lost 6.1 per cent on average. Only one of the 16 funds in the Mercer survey produced a positive return – Martin Currie Australian Real Income, which was up 2.2 per cent.
These funds have been hamstrung by their holdings in banks and telcos – two sectors that produce high dividend payouts but which have performed poorly over the past year.
Ethical funds. The median return of the 11 ethical funds in the Mercer survey was a loss of 3 per cent. The top performing fund was Bennelong ESG Australian Equities, which was up 2.9 per cent.
The only other ethical fund to produce a positive return Alphinity Sustainable Share, which was up 0.8 per cent.
Small company funds. While the S&P/ASX Small Ordinaries was down 8.7 per cent last year, small company fund managers did a little better, with a median loss of 6 per cent.
As is common in the small cap sector, returns varied greatly. The top performing fund was QVG Opportunities, which produced a return of 14.6 per cent. Only four other funds of the 39 surveyed produced positive returns.
Microcap funds. Stocks in the microcap sector suffered heavy falls last year, with the S&P/ASX Emerging Companies Index down 19.9 per cent. Fund managers in the sector beat the index, producing a median loss of 3.3 per cent.
The top performing fund was Perennial Microcap Opportunities, which produced a return of 9.1 per cent. Eley Griffiths Australian Emerging Companies was up 4.4 per cent, Viburnum Strategic Equities Fund was up 3.4 per cent and Macquarie Australian Emerging Companies was up 1.1 per cent. All the other funds suffered losses.