'Activeness' dips across large-cap sector
Financial advisers should rethink the benefits of value-style share funds as active management falls across the Australian large-cap share funds sector, according to Morningstar's latest sector wrap.
While focusing on investment style has produced strong results for large cap investing in recent times, the spread between styles narrows over the long-term, Morningstar stated.
"Value-style fund managers adopt various processes which deliver varying outcomes," the review stated.
"Investors and advisers therefore need to be mindful of the underlying holdings to ascertain the likely path of returns and whether or not a particular strategy fits with an overall portfolio and risk profile."
According to Morningstar, there has been a fall in the "activeness" of large-cap Australian share funds over the past 12-15 months due largely to a number of fund managers whose portfolios have become "meaningfully less different than the index".
Understanding the role of an investment strategy in portfolio is critical, and simply assembling highly-rated managers can duplicate style exposures and reduce diversification, the review stated.
Morningstar added that advisers should favour funds with discounted base fees, high watermarks that cannot be reset, and longer crystallisation periods.
As part of the sector wrap, Morningstar awarded four strategies a gold rating, 12 a silver rating, and 23 a bronze rating.
Recommended for you
With active ETFs becoming the latest choice as fund managers target the retail audience, their high fees may be a detractor as research finds investors are shunning those priced any higher than 50 bps.
The possibility of a dissenting vote from shareholder L1 Capital has led Platinum Asset Management to scrap its conversion plan for the $450 million Platinum Capital LIC into an ETF.
Family office Lederer Group has made an off-market takeover bid for ASX-listed Elanor Commercial Property Fund, with chair Paul Lederer taking exception at the firm’s lack of accountability, oversight and transparency.
Janus Henderson is actively seeking to partner with private wealth firms in Australia as it looks to expand its number of strategic partnerships, as well as focus on retirement income product development.
