How diversification and a global outlook paid off

1 March 2019

ready to swing back towards value.

Diversification has been the name of the game for those fund managers who have shone through in the latest FE Crowns recalculation.

With the past six months having been a period of volatility coupled with some significant geopolitical uncertainty, strategies which encompassed diversity in terms of both geography and stock selection were those which shone in the period with the Wingate Spectrum Fund and the Bell Global Emerging Companies Fund being two exemplars.

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Sitting within the Australian Unity product suite, the Wingate Spectrum fund moved up from two crowns to five crowns based on having delivered in large part on its objective of achieving strong returns, regardless of the performance of global share markets.

The Bell Global Emerging Companies fund also underscored the value of a diversified approach in volatile times, moving up from one crown to five crowns. Similarly, the Dimensional Global Core Equity Trust was rewarded with a similar lift from two crowns to five.

While the Crown recalculation has served to validate growth-focused strategies bringing some relative new-comers to the fore, it has also reinforced that some of the more notable fund managers such as Fidelity, Magellan and Platinum have maintained rather than exceeded their objectives.

By comparison, funds with a strong Australian equities focus were seen to struggle particularly those with a small-to-mid-cap focus.

Commenting on the situation, independent analyst, Stephen van Eyk said the recalculation of the crowns had served to underscore the generally positive story with respect to growth strategies over the past five years, and particularly those which had maintained a selective focus on technology stocks.

He said those managers who had astutely invested in particular technology stocks had done particularly well while the Crown recalculation had also reflected the rewards which had been driven by those managers who had pursued global exposures and who had also benefited from movements in the Australian dollar by remaining unhedged.

However, van Eyk said that while the crowns had definitely reflected the degree to which growth strategies had outperformed value strategies over the period, this might not continue to be the case as markets moved further into 2019.

“Looking ahead, there is evidence to suggest that conditions in 2019 may suit value managers,” he said.

FE Australia’s Head of Data, Australia and New Zealand, Stuart Alsop agreed with van Eyk’s analysis, adding that the funds that performed best over the past six months were those that most effectively navigated downside risk.

He said it was a case of which strategies were best suited to the environment of increased volatility in terms of their risk/return metrics.

Alsop said that while there had been a lot of commentary and speculation about how markets would play out in 2019, the FE Crown Ratings reflected the reality of what had occurred over the previous six months.

“They therefore represent a solid foundation upon which to build forecasts,” he said.


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