Index funds majority of top capital preservation funds
When it comes to the big end of the funds management town it seems advisers should look to index funds rather than active funds in the mixed asset balanced space, according to data.
Funds had a tumultuous past year with global and sector sell-offs left, right and centre and finding returns had been difficult.
With capital preservation at the forefront of investor minds given the current environment, Money Management looked at how the big funds management groups compared to each other when it came to mixed asset balanced funds.
According to FE Analytics data, over one year to 31 July 2019, four of the top five performing capital preservation funds were index funds.
Martin Currie Diversified Income fund did top the charts with a one-year return of 12.5 per cent. The fund has its highest asset allocation towards Australian equities (47.3 per cent), followed by real assets (29.3 per cent), and Australian fixed income (19.3 per cent), and cash (4.2 per cent).
The fund also topped the charts when it came to returns over five years at 60 per cent and has a current FE Crown Fund Rating of four (out of five).
However, the majority of the top performing funds over one year were index funds, namely Ipac Select Index Balanced (10.3 per cent), Ipac Life Choices Index 50 (9.8 per cent). Vanguard Diversified Balanced Index (9.54 per cent), and Vanguard Wholesale Balanced Index (9.51 per cent).
The only other active fund – IOOF Balanced Investor Trust – came in at equal fifth at 9.51 per cent.
Top five mixed asset balanced fund returns v sector one year to 31 July 2019
Source: FE Analytics
All the bottom performing funds were active funds and were charging sometimes double the annual management charge of the passive funds. The worst offenders being Ipac Pathways Value fund charging 1.71 per cent and Ipac Classic Value Portfolio charging 2.01 per cent.
The bottom funds included JPMorgan Diversified Risk with a return of (2.74 per cent), Zurich Investment Plan Balanced (4.04 per cent), Ipac Classic Value Portfolio (4.5 per cent), Ipac Pathways Value (4.7 per cent), and AMP MyNorth Dynamic Balanced (5.1 per cent).
Even over a longer time frame, index funds appeared in the top five performing funds.
Over the three years to 31 July 2019 Macquarie Balanced Growth was the top performing mixed asset fund at 30.3 per cent, followed by Fiducian Balanced fund at 29.7 per cent.
Two index funds followed – Ipac Select Index Balanced (29.3 per cent) and Ipac Life Choices Index 50 (28.8 per cent) – and Martin Currie Tactical Allocation X rounded out the top five at 28 per cent.
The data also found that the Ipac Select Index Balanced fund in terms of returns came fourth over the five years to 31 July 2019 at 49.3 per cent. The fund had an annual charge of 0.45 per cent and has a current FE Crown Fund Rating of four.
Again, the bottom five were purely active funds that had annual charges exponentially higher than the top five and the index funds.
The highest annual charge was ClearView Managed Investments Diversified Balanced at 2.3 per cent. The fund came in at third last in terms of returns at 15.3 per cent.
Bottom mixed asset balance fund returns v sector over three years to 31 July 2019
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