Lonsec cautions against backing last year’s winners
While it is one of the most common investment strategies to back “last year’s winner,” research house Lonsec has warned it is very rare that asset classes consistently outperform and that backing last year’s winner could end up making a loss for investors.
Lonsec said that all too often investors pile into the best performing asset class of the last year in the hope that success will be repeated.
The table below reveals the best performing asset classes for each financial year since 2008 and shows that not every winner repeats its outperformance in the following year.
Conversely, Lonsec pointed out the table reveals that avoiding asset classes that performed poorly in the previous year can cost investors in the following year.
For example, if investors had reduced their exposure to Aussie shares following a negative return in 2012, they would have missed out on one of the better-performing asset classes in the subsequent two years (+21.9 per cent and +17.3 per cent, respectively).
“It’s a reminder that a well-researched, diversified portfolio is better over the long term than chasing last year’s winners,” Lonsec said.
Recommended for you
In the latest Meet the Manager profile, Money Management speaks with Michael Skinner, founder and managing director at Blackwattle Investment Partners.
Perpetual has seen AUM rise 6 per cent in the last quarter but the departure of a longstanding JOHCM fund manager led to outflows of $2.2 billion from his strategy.
Global fixed income fund Bentham Global Opportunities has been added to several major platforms, enabling it to be accessed more easily by financial advisers.
Following yesterday’s news about First Sentier Investors closing four investment teams, a second global asset manager has announced it is closing its only dedicated Australian fund.
