Market neutral funds out perform equities markets
The times appeared to suit market neutral funds in the year to February, according to the latest data released by research and ratings house, Zenith Investment Partners.
The analysis of market neutral funds suggested the equity market came in behind the sector in the year to February 2015-2016.
Zenith Market Neutral sector analyst, Justin Tay, said that the volatility of the market, while working in Zenith's favour, was giving rise to some unexpected results.
"The volatility of fund returns, as measured by Standard Deviation, was approximately half of the Australian equity market's volatility at 6.2 per cent compared to the S&P/ASX 300 Accumulation Index of 12.7 per cent," he said.
"Although there was a wide level of dispersion in the performance of the peer group, the median return for Zenith rated funds was 9.5 per cent, comparing favourably to both the sector benchmark (Bloomberg AusBond Bank Bill Index) and the Australian equity market (S&P/ASX 300 Accumulation Index)."
Tay stated that the last year represented a return to form for market neutral strategies, a contrast to 2014 where the investment environment was driven by challengingly low levels of performance dispersion. Despite market funds outperforming equities markets, Tay is confident that the transition of change since 2014 has returned markets to a workable field.
"We assess the performance, drawdown and correlation of equity market neutral strategies against all the major asset classes at both a global and Australian level," Tay said.
"Zenith's expectation at the time was that the challenging investment environment would be transient and would normalise over the short to medium-term, which has indeed been the case over the past 12 months."
AUTHOR
Hope William-Smith
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