Factors such as branding, fund size, investment style, internal operations (and luck) have ensured that when it comes to the Australian equities sector over recent years, the top 10 funds in terms of performance, inflows and funds under management (FUM) are for the most part uncorrelated.
Assirt Researchsays for established fund managers that gain the trust of investors and advisers, funds flow does not just come down to performance, with brand and sheer strength of distribution offering huge benefits.
TheColonial First State(CFS) Imputation fund has topped the list in terms of FUM for the past four years and also managed to top the inflows table in 2000 and 2001. While it dropped to the middle of the pack in 2002-03, the figures are still interesting when you consider the fund was nowhere to be seen in the top 10 in terms of returns over the four-year period.
Assirt says when it comes to well recognised brands, “the marketing spin on things can entice people to stay in a fund longer than they should, which can be a good or a bad thing”.
“CFS is still a good manager. Size of FUM is an issue, but they’re still managing to make good, but not stellar, returns,” Assirt says.
BT’shigh profile brand carried it through many years of bad performance before investors’ confidence was finally shaken and they pulled the plug.
Part of the reason the BT funds remained comparatively full during negative staff and management issues, Assirt says, “was because of a good track record and some previous good market timing”.
And having survived a difficult run, it appears BT may make a comeback in the Australian equities playing field, still holding a place among the big players in terms of FUM.
One success story over recent years isHunter Hall Investment Management. Employing a partial absolute return type strategy, Assirt says there are few managers that can change the dynamic of their portfolios so dramatically as Hunter Hall.
Recent success, such as returns of 11.2 per cent in turbulent 2002 and 24.6 per cent last year, has led to a significant increase in the size of the fund, but Assirt says this will not be a threat to performance.
“It comes down to when they decide to close to inflows — we’re concerned about when they do close and we’re keen to make sure they’re still operating within capacity.”
While inflows into the Hunter Hall fund do highlight the worrying trend of performance chasing, it has been encouraging to see style neutral JB Were adding value through mixed cycles, Assirt says.
