Positive report card for Australian equities

Both big brand and boutique Australian equity managers have performed well overall in the latest Standard & Poor's Fund Services Australian equities sector review, with the quality of research singled out for praise.

This is a result of the strong competitive forces at play within the Australian equity sector and the tough environment for retail flows, S&P stated.

The six managers to receive the top five star rating were: Schroders, which was upgraded; Fidelity; BT; Perpetual's Industrial Share Fund; and the flagship offerings of Perennial Value and Tyndall.

Overall, the report covered 104 capabilities offered by 57 managers, with eight funds across five underlying managers upgraded and nine funds across eight managers downgraded. The only strategies currently 'on hold' are four INGIM strategies, as a result of the UBS acquisition announcement.

"The volatile market conditions we are currently experiencing are generally very favourable to active management, with compressed valuations creating opportunities for managers to purchase quality stocks at attractive valuation levels," said S&P Fund Services analyst James Gunn.

The report also found most managers continued to espouse a bottom-up approach, but with a greater acceptance of macro issues and the value of informed top-down analysis.

S&P predicted high-profile departures and leadership changes would continue to occur, and stated the rapid growth of the boutique business model over the past five years and the response by mainstream managers to shore up their key stock pickers had generally improved retention.