Bond funds demonstrating consistent top-quartile performance

S&P S&P Dow Jones Indices active management bonds fixed income

8 May 2024
| By Laura Dew |
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An Australian bond fund is the only Australian fund to retain top-quartile performance in their sector over five years, according to S&P Dow Jones research. 

The research firm’s Persistence Scorecard measures the consistency of a fund’s relative performance over five years to 31 December 2023.

Some 44 per cent of the 16 top quartile bond funds in 2021 remained in the top quartile for the next two years compared to just 2 per cent of top quartile equity funds and zero Australian A-REIT funds.

Looking over five years, 5.8 per cent of the funds in the top quartile in 2019 had managed to remain in the top quartile in 2023, representing just one fund.

This was the only fund in the Australian investment universe across all sectors covered by the research to achieve this consistent top-quartile performance.

S&P said this was helped by the majority of active bond managers outperforming their benchmark in 2023 in contrast to a challenging time for equity managers.

“2023 was a challenging environment for active equity managers in Australia and persistence of outperformance was hard to find, largely in line with the results of prior years.

“In comparison to equity managers, there was a higher degree of persistence in the outperformance of bond managers versus peers as well as benchmarks; however more results will need to be seen consistently over longer time periods to conclude the existence of genuine skill among bond managers.”

Looking at their alpha persistence over three consecutive 12-month periods, 45 per cent of Australian bond funds had outperformed their benchmark in December 2021 and 41 per cent of these had continued to outperform in December 2023.

On the other hand, 59 per cent of Australian equity funds had outperformed in December 2021 but the percentage that had continued to outperform in December 2023 fell dramatically to just 2 per cent.  

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