Which sectors are proving best for young funds?
Some sectors proved especially kind to funds launched in the last three years, with young funds consistently delivering amongst the top performances in the sector since their launch, according to data from FE Analytics.
Research by Money Management found that certain sectors within the equities universe provided the best environment for young funds to deliver stand-out results. These weren’t necessarily the best performing sectors overall, but rather the ones where young funds specifically excelled comparative to their more established counterparts.
The significant majority of the 18 funds launched in the Australian Small and Mid-Cap Equity sector in the last three years were in the top half of performers sector-wide over that period. Four were in the top 25 per cent in the three months to 31 January, 2018 while six were in the last six months.
There were some stellar performances within those funds. The Perennial Value Microcap Opportunities and Eley Griffiths Group Emerging Companies funds both recorded returns in approximately the top 10 per cent of the sector for all measured time periods since their inceptions.
The sector was kind to funds that struggled to start strong, too. The Ophir High Conviction fund delivered returns in the top two per cent and 12 per cent for the year and six months to 31 January respectively, despite a rocky beginning that placed it in the 66th percentile of the sector for performance over the last two years.
The Equity Infrastructure sector also suited young funds. Of the five funds to join the sector in the last two years, three have consistently ranked in the top 30 per cent of funds since their launch (namely, the 4D Global Infrastructure, Magellan Infrastructure (Currency Hedged) (Managed) and UBS Clarion Global Infrastructure Securities funds).
Of these, the 4D and Magellan funds did not leave the top quartile for performance across measured time periods.
The third-best sector for recently launched funds was the Equity Specialist space. Five funds joined the 23-trust big sector in the last three years, of which the majority have delivered very strong returns.
The BlackRock Concentrated Industrial Share fund, launched in January 2016, was in the top 10 per cent of sector performers in the year to 31 January, 2018, with returns of 32.04 per cent. Impressively, it was also the top performer sector-wide over the last six and three months with returns of 18.86 and 9.54 per cent respectively.
The BetaShares Global Banks ETF and ETFS ROBO Global Robotics and Automation ETF also performed well, placing in the top 25 and 10 per cent for performance in the sector respectively across the measured time periods since their inception.
As these are exchange traded funds (ETFs) though, direct comparison to active funds in the sector would not be fair.
Finally, not all sectors suited young funds in the last three years. The Australian Equities sector was, after strong performances by recent launches were balanced out, the worst for new funds.
The majority of newly launched funds recorded returns in the bottom half for the sector, with a significant portion failing to deliver performances in the top 50 per cent in any time period since their launch. BetaShares’ Australian Equities Strong Bear Hedge fund, for instance, has been in the 100th percentile across measured periods since its launch.
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