Aussie broad-cap funds slide in market correction
Terrible October lived up to its reputation and the market correction saw Australian broad-cap funds slide, with only two passive funds managing to stay above the line.
Wealth Within’s chief analyst, Dale Gillham, said the All Ordinaries Index fell around 4.5 per cent as heavy sell-offs of US tech stocks rippled through to the Australian market.
The only funds to rally during the month were the BetaShares’ Australian Equities Strong Bear Hedged and BetaShares’ Australian Equities Bear Hedged, which returned 15.58 per cent and 6.56 per cent in the month.
The funds aim to help investors profit from, or protect against, a declining Australian share market, and seek to generate magnified returns that are negatively correlated to the returns of the share market (as measured by the S&P ASX 200), so it’s no surprise they outperformed.
While the negative returns produced by all other funds in the sector didn’t significantly affect their long-term performance, the leader board for the year to last month’s end has slightly changed, with Sandon Capital Activist sitting high with returns of 16.90 per cent.
DDH Selector Australian Equities is still in the top five, returning 14.94 per cent for the year to last month’s end, and Lincoln Australian Growth was similarly a stalwart, returning 14.22 per cent.
Gillham said the energy sector was hit the hardest, which was down 8.5 per cent, IT was down 6.1 per cent and consumer discretionary was down 7.6 per cent, but the declining market could actually present some great opportunities.
“I personally get excited at times like this because the bigger the decline, the bigger the opportunity to profit from the next rise,” he said.
“Is it possible that we may see further falls? Yes, but any fall will be very short-lived and at most around two per cent in price. My expectation is that by the end of the year the All Ordinaries Index will be around or above the August high of 6481.30 points, which equates to a 12 per cent rise from current levels.
“So now is not the time to panic, but rather get excited and get ready to buy.”
The chart below shows the performance of the funds as against the All Ordinaries Index for the year to last month’s end.
Recommended for you
The latest budget papers have outlined a $10 million provision for ASIC greenwashing enforcement activity as well as funds for a sustainable labelling regime to be partially met by industry levies.
Betashares has expanded its fixed income solutions with the launch of a new ETF offering exposure to subordinated bonds issued by the big four Australian banks.
The latest monthly Bank of America global fund manager survey has found investors are starting to shift cash into bonds as cash allocations reach a three-year low.
AUSIEX analysis has discovered the net traded value of Australian dollar fixed income ETFs more than doubled from January to April, reflecting growing investor demand.