Which fund houses have all their equity funds topping the performance tables?

Equity fund ranges run by the likes of OC Funds Management, Lazard Asset Management and Legg Mason Global Asset Management have enjoyed consistently strong runs over the past five years, research by Money Management shows, with the majority of their portfolios in the top quartile of their respective sectors.

We ran the total returns of every equity fund in the Australian Managed Investments universe over the five years to the end of 2017, ranked them by quartile, organised them by management group and determined what share of each group’s range was in the top quartile.

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The below table shows all the fund groups where more than half of funds with a long enough track record made first-quartile gains at the end of the five-year period. Firms with fewer than three eligible funds have been excluded from the findings.

As can be seen, only one fund group – OC Funds Management – has its entire range of funds at the very top of their respective peer groups. Lazard Asset Management, Legg Mason Global Asset Management and Ausbil Investment Management have fourth-fifths or more of their line-up making the cut.

The fund groups with the most equity funds in the top quartile over 5yrs to the end of 2017

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Source: FE Analytics

OC Funds Management is a smaller companies specialist that runs three funds: OC Dynamic Equity, OC Micro-Cap and OC Premium Small Companies. All three reside in the AMI Equity – Australia Small/Mid Cap and all three are in its top quartile.

The fund house said that exposure to small-cap stocks offers a valuable method of diversifying the bias that most Australian investors have to large-cap areas such as banks and resource stocks while offering greater growth potential.

“A challenging domestic economy has created a difficult operating environment for many of the larger companies listed on the ASX, including the major banks,” it added.

“The beauty of small-cap investing is that despite the structural and macro issues facing the broader economy, it is possible to find small-cap companies that are performing well and off much lower earnings bases than their larger peers.”

OC Micro-Cap is the best performer from the fund house’s range. Over the five years to the end of 2017, the five FE Crown-rated fund generated a 174.36 per cent total return – making it the third best performer of its peer group overall.

Performance of OC Micro-Cap vs sector over 5yrs to the end of 2017

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Source: FE Analytics

Like all the portfolios run by OC Funds Management, the underlying process focuses on small caps that have a strong management team, a simple and transparent business model, a high cash conversion rate and a sustainable competitive advantage. Top holdings include vehicle aftercare and accessories firm AMA Group, machine learning dataset provider Appen Limited and lottery retailer Jumbo Interactive.

Lazard Asset Management has five of its six eligible equity funds in their respective sectors’ top quartile over the five-year period examined in this research. They are Lazard Australian Diversified Income, Lazard Australian Equity, Lazard Select Australian Equity, Lazard Global Small Caps and Lazard Global Listed Infrastructure.

Legg Mason Global Asset Management also has five top-quartile funds out of a possible six: Legg Mason Martin Currie Australian Core Equity Trust, Legg Mason Martin Currie Real Income, Legg Mason Martin Currie Select Opportunities, Legg Mason Martin Currie Equity Income and Legg Mason QS Investors Global Equity Trust.

The final group with fourth-fifths or more of its fund range in the top quartile is Ausbil Investment Management. Four out of five funds outperformed, with the winners being Ausbil Australian Active Equity, Ausbil Australian Geared Equity, Ausbil MicroCap and Ausbil Australian Emerging Leaders.