Big fund manager names do not assure outperformance
Picking funds based on the big asset management players and their reputations does not equate to beating a fund’s benchmark or sector peers, according to FE Analytics.
Using FE/Fundinfo data, Money Management looked at three global equity funds that either had a star manager or a big asset manager name.
The funds in question were Magellan Global fund, Perpetual Global Share A fund, and Platinum International C fund.
Over the three years to 31 August 2019, the top-performing fund was star manager Hamish Douglass’ Magellan Global fund that returned 64.7%, and 121.3% over five years,
This was followed by longstanding asset manager Perpetual Global Share A at 43.2%, and Kerr Neilson’s Platinum International C at 31.9%.
However, both the Perpetual and Platinum funds did not beat their respective benchmarks – MSCI World (47%), and MSCI All Country World (45.1%).
The Platinum fund was also unable to beat its average sector peers in performance over one, three, five, and 10-year time periods and was placed in the bottom quartile except over the five-year period where it was placed in the third quartile.
The average global equity sector returned 39.2% over the three years to 31 August, 2019.
Star manager and recipient of Money Management’s Lifetime Achievement Award in 2014, Kerr Neilson, stepped down as chief executive of Platinum last year but has remained a full-time executive director of Platinum Group and as a member of the investment team.
The International C fund is run by the firm’s chief executive and chief investment officer, Andrew Clifford and portfolio manager Clay Smolinski.
The fund’s latest factsheet noted the extended US-led bull market had impacted the fund’s relative returns and that it was the last 16 months that had been the main cause of apparent longer-term underperformance.
“Over the last two years, the fund has delivered 6% per annum, however, we are a cumulative 19% behind the index. This is the biggest negative gap in relative performance since 1999,” it said.
The fund currently holds a quantitative risk adjusted FE/Fundinfo Crown Fund Rating of One Crown (out of five).
The fund’s largest sector weighting was financials at 14.7%, followed by communication services (13.1%), industrials (11.2%), information technology (9.7%), and materials (9.4%).
Funds performance v global equity sector and benchmarks
Source: FE Analytics
While Perpetual Global Share A fund did not outperform its benchmark, it managed to beat the sector average and was placed in the third quartile over the three years to 31 August, 2019.
The fund’s latest factsheet noted its overweight to electronics payments company Euronet Worldwide detracted relative performance as the stock fell following the release of its June-quarter financial results. However, the fund noted that it would continue to hold the stock “on its robust earnings outlook and its relatively long runway for market share gains”.
The fund currently holds a Three Crown rating and has the largest sector allocation towards consumer discretionary (19.1%), followed by communications services (18.7%), cash and other (16.9%), financials ex property (13.6%), and consumer staples (11.7%).
Douglass’ global fund has been placed in the first quartile in terms of performance over both short and long-term time horizons, and has received a Five Crown rating.
According to its factsheet, the fund has outperformed its benchmark 94% of the time over five years.
The fund’s latest sector allocation was internet and eCommerce at 17%, followed by informational technology (16%), consumer defensive (13%), and payments and restaurants (both at 12%).
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