Which volatile equities were worth the risk in 2017?
Many highly volatile funds in the Australian Equities sector rewarded investors for taking a risk with them in 2017, with most of the top-performing funds having both returns and volatility well into the double figures.
Unsurprisingly, data from FE Analytics showed that high volatility is often needed to record the highest returns. Money Management found the funds that, in 2017, were worth taking the risk on.
Ausbil’s Australian Geared Equity fund, which is large with $183,100,000 funds under management (FUM), delivered the strongest returns to balance out the risk investors took with its high volatility, delivering returns of 29.04 per cent for the year with volatility of 14.43.
Over the long-term, investors were not well rewarded though. The trade-off of annualised ten-year volatility of 31.27 was returns of just 1.21 per cent over the same period. It improved over five years though, with returns rising to over 20 per cent while volatility only slightly fell.
BlackRock’s Concentrated Total Return Share, Equity and Growth funds, which are all amongst the fund manager’s most volatile, recorded the highest returns for the entire sector last year. They returned 39.32, 30.76 and 30.56 per cent respectively.
Across the same time period, their volatility was all just shy of 10 per cent.
Colonial First State’s First Choice Wholesale Geared Share fund, Macquarie’s Life Australian Enhanced Equities fund and Perpetual's Wholesale Geared Australian fund also rewarded investors who risked their volatility in 2017. They all recorded returns in excess of 20 per cent for the year, while their volatility was comfortably in the double figures.
The sector as a whole recorded strong average returns at 11.85 per cent for 2017, although this was still significantly lower than the above funds. Its volatility was much lower at 1.68 per cent.
It is worth noting however, that over other time periods, the sector performed more poorly than the higher volatility funds did in general. Over three years the sector’s annualised performance was just 8.25 per cent, and it was in the single figures over shorter and five-year periods too.
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