Who were the Aus Equity sector’s best performers last year?
BlackRock dominated amongst top performers in the Australian Equities sector last year, with data from FE Analytics showing that they took the top three places for highest returns.
Research by Money Management found that the fund manager’s Concentrated Total Return Share brought in the top returns for the sector in 2017, at 39.42 per cent. The BlackRock Equity and Growth funds filled out the podium, returning 30.76 and 30.56 per cent respectively.
The Equity and Growth funds are both derivatives of BlackRock’s Concentrated Industrial Share fund, explaining the similarity in performance.
The Macquarie Life Australian Enhanced Equities fund delivered the next best returns with 29.69 per cent, with a geared fund, Ausbil Australian Geared Equity, completing the top five with 29.04 per cent.
These returns all tripled, or nearly tripled, the sector average of 11.85 per cent for the year.
BlackRock head of fundamental active equities Australia, Charlie Lanchester, said that being a very active fund with only a handful of stocks contributed to the top performing fund’s success.
“We benefit from being a small, nimble and agile fund at the start of its life,” he said.
Lanchester also said that the team behind the fund were “probably the most critical factor in its success.”
In terms of investment decisions, Lanchester said that the BlackRock funds were advantaged by the fact that they exclude the big banks and resources from their universe, allowing the managers to looks at “a much more balanced spread of stocks” for portfolio construction.
He said that it also meant that they were not worried about index weights.
“That means we’re making much more sensible decisions around genuinely good decisions … we’ve probably shied away from some very large stocks in the index and instead picked some good alpha in mid-tier businesses.”
Lanchester pointed out that the Concentrated Total Return Share fund’s performance was especially impressive considering it held approximately 20 per cent in cash throughout the year.
Some of the best performing funds in 2017 have disappointed in 2018 thus far, however. While one month’s returns are not necessarily indicative of true performance, some funds are still experiencing at least a temporary fall from grace.
The Perpetual Wholesale Geared Australian went from being in the fifth percentile of performers last year to the 100th for January, 2018 returns. BetaShares’ Geared Australian Equity was in the sixth percentile for 2017 but sat in the 94th for this January. Ausbil’s Australian Geared Equity fund also dropped from its top-five position to the 90th percentile for January, as its returns plummeted to -1.09 per cent.
Of course, it’s worth noting that these are all geared funds, so extreme volatility such as this would not be unexpected.
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