Invest
Cheaper investment funds are more volatile, new research says
New research says that low-cost multi-asset investment funds are more likely to experience volatility when markets decline.
Cheaper investment funds are more volatile, new research says
New research says that low-cost multi-asset investment funds are more likely to experience volatility when markets decline.
The new research by Zenith reviewed 88 rated funds and compared the performance of a low-cost group with management fees of below 0.58 per cent per annum with a higher cost group with fees above this amount.
The research found there had been a significant increase over the last few years in the number of low-cost multi-asset funds due to sensitivity regarding management fees in a low yield environment.
The research found the groups achieved returns of 8.5 per cent and 8.4 per cent, respectively, but there was a more pronounced difference in risk.
The low-cost group suffered a worst loss of 6.4 per cent compared with 5.1 per cent for high cost funds.
Zenith attributed the drawdown to comparative allocations to alternatives between the two groups, with the low-cost group maintaining an average 0.8 per cent allocation to alternatives versus 6.8 per cent in the high-cost group.
Zenith head of multi asset Andrew Yap said the research showed that investors should not choose a product based solely on its cost.
“While investor interest in low-cost funds is likely to remain elevated in a low rate environment, we caution against selecting products based solely on cost considerations,” he said.
Mr Yap said that there were differences in the ways that these funds were managed and it made sense for investors to be aware of those.
“Investors need to be aware that these fundamental differences can impact relative performance between the groups and affect risk and return outcomes, despite low- and high-cost multi-asset funds having a similar label presented to investors,” he said.
RELATED ARTICLES
Investment insights
Financial markets focus on shareholder engagement as companies report results
In a week dominated by financial market developments and corporate announcements, companies are increasingly recognising the importance of shareholder engagement in driving market outcomesRead more
Investment insights
Future Generation Australia declares increased dividend amid strong investment performance
Future Generation Australia (ASX: FGX) has announced a significant outperformance against the S&P/ASX All Ordinaries Accumulation Index, reporting a 14.1% increase in its 12-month investment ...Read more
Investment insights
New business landscape shifts as regional areas and company setups gain traction
The latest data from the January 2026 Lawpath New Business Index reveals a dynamic shift in how Australians are choosing to embark on new business ventures. While the overall number of new Australian ...Read more
Investment insights
Good Return secures $1 million investment from Macquarie Group Foundation to boost women-led enterprises
In a significant development for women-led enterprises across the Asia-Pacific region, Good Return has announced a $1 million investment from the Macquarie Group Foundation into its Impact Investment ...Read more
Investment insights
Beyond the trophy: what the REB Awards 2026 reveal about real estate’s next competitive play
Nearly 900 submissions for just over 30 winning slots is more than a celebration—it’s a market signal. In Australia’s roughly $10 trillion residential property market, awards have become a strategic ...Read more
Investment insights
Parents are funding know‑how, not deposits: A case study in Australia’s new first‑home playbook
With listings tight and auctions unforgiving, a quiet shift is underway: parents are increasingly paying for professional buying expertise instead of topping up deposits. This case study unpacks the ...Read more
Investment insights
State Street Markets reveals a shift in investor risk appetite amid economic uncertainties
In a recent revelation by State Street Markets, the latest State Street Institutional Investor Indicators have showcased a notable shift in investor behaviour as uncertainty looms over global ...Read more
Investment insights
UniSuper welcomes back seasoned strategist Mark Himpoo as Senior Portfolio Manager
In a strategic move aimed at bolstering its in-house investment capabilities, UniSuper has announced the return of Mark Himpoo as Senior Portfolio Manager, Equities. Himpoo's return marks a ...Read more
Investment insights
Financial markets focus on shareholder engagement as companies report results
In a week dominated by financial market developments and corporate announcements, companies are increasingly recognising the importance of shareholder engagement in driving market outcomesRead more
Investment insights
Future Generation Australia declares increased dividend amid strong investment performance
Future Generation Australia (ASX: FGX) has announced a significant outperformance against the S&P/ASX All Ordinaries Accumulation Index, reporting a 14.1% increase in its 12-month investment ...Read more
Investment insights
New business landscape shifts as regional areas and company setups gain traction
The latest data from the January 2026 Lawpath New Business Index reveals a dynamic shift in how Australians are choosing to embark on new business ventures. While the overall number of new Australian ...Read more
Investment insights
Good Return secures $1 million investment from Macquarie Group Foundation to boost women-led enterprises
In a significant development for women-led enterprises across the Asia-Pacific region, Good Return has announced a $1 million investment from the Macquarie Group Foundation into its Impact Investment ...Read more
Investment insights
Beyond the trophy: what the REB Awards 2026 reveal about real estate’s next competitive play
Nearly 900 submissions for just over 30 winning slots is more than a celebration—it’s a market signal. In Australia’s roughly $10 trillion residential property market, awards have become a strategic ...Read more
Investment insights
Parents are funding know‑how, not deposits: A case study in Australia’s new first‑home playbook
With listings tight and auctions unforgiving, a quiet shift is underway: parents are increasingly paying for professional buying expertise instead of topping up deposits. This case study unpacks the ...Read more
Investment insights
State Street Markets reveals a shift in investor risk appetite amid economic uncertainties
In a recent revelation by State Street Markets, the latest State Street Institutional Investor Indicators have showcased a notable shift in investor behaviour as uncertainty looms over global ...Read more
Investment insights
UniSuper welcomes back seasoned strategist Mark Himpoo as Senior Portfolio Manager
In a strategic move aimed at bolstering its in-house investment capabilities, UniSuper has announced the return of Mark Himpoo as Senior Portfolio Manager, Equities. Himpoo's return marks a ...Read more
