
Most read
Bitcoin price jumps, but how high can it go?...
Bitcoin price jumps, but how high can it go?...

Latest Podcast
Home values up 30% (or are they); NFTs taking the world by storm, and why Keatin...
Home values up 30% (or are they); NFTs taking the world by storm, and why Keatin...

Resources
There is $17.5 billion in lost and unclaimed super across ...
There is $17.5 billion in lost and unclaimed super across ...
Invest
Best and worst performing funds through COVID-19
The COVID-19 pandemic has seen three-year gains wiped off in just six weeks during the March quarter, with some strategies outperforming others, new research has found.

Best and worst performing funds through COVID-19
The COVID-19 pandemic has seen three-year gains wiped off in just six weeks during the March quarter, with some strategies outperforming others, new research has found.

Morningstar’s quarterly report showed that all strategies experienced losses but active management strategies outperformed value investing, according to Morningstar’s Ross MacMillan and Michael Malseed.
“One persistent debate among investors over the past five years has been around the merit of growth over value investing.”
“Since 2015, value managers have been trounced by growth managers.”
“However, with markets collapsing in the first quarter of 2020, many investors may have assumed it would be time for the value active managers to shine. Looking at the performance to date, this hasn't been the case,” said Mr MacMillan and Mr Malseed.
Best-performing funds
Large-cap fund outperformers over the quarter
Morningstar’s report showed that 38 strategies beat the category benchmark in the first quarter of 2020 – of these, eight are classified as growth managers, 21 as blend-style managers, and only three value managers.
The best-performing large-cap strategy over the quarter was Hyperion Australian Growth Companies. Despite the portfolio trading at a materially higher P/E multiple than the broader market, it provided excellent downside protection during the sell-off.
An overweighting to quality names in the healthcare and technology sectors benefited the fund. Meanwhile, the portfolio doesn’t hold any energy stocks and is substantially underweight in economically sensitive financials.
BetaShares Managed Risk Australian Share ETF (AUST) and AB Managed Volatility Equities were also notable outperformers, given that their strategies specifically aim to provide downside protection in volatile markets. In this respect, they delivered true to label. It should be noted.
Small-cap fund outperformers over the quarter
The report also found only 13 active managers outperformed the small-cap benchmark over the first quarter of 2020; however, we note that over the long term, active managers in small caps have, on average, generated significant outperformance.
The best-performing strategy was Hyperion Small Growth Companies, which, like its large-cap counterpart, is overweight quality names in healthcare and technology while being underweight deep cyclicals in energy and materials. WAM Capital Ord (WAM) and The Montgomery Fund both benefited significantly from their high cash holdings over the period. These cash holdings had previously been a drag in the bull market run up into 2020.
Worst-performing funds
While some strategies worked better during the global sell-off, passive and value investors underperformed the most over the quarter.
Large-cap fund underperformers over the quarter
Morningstar’s large-cap coverage universe 50 active and passive strategies underperformed the category benchmark in the first quarter of 2020.
This included only one growth manager, Ausbil Australian Active Equity (6117), 27 blend-style managers and 17 value managers.
The three worst-performing strategies were, not unexpectedly, geared strategies: Perpetual Wholesale Geared Australian (9835), Ausbil Australian Geared Equity (15329), and First Sentier (formerly CFS) Wholesale Geared Share (4715).
These strategies use leverage to gross up equity-market exposure by 50-60 per cent, which amplifies returns on the upside and down.
Small-cap fund underperformers over the quarter
Nineteen active small-cap managers underperformed over the quarter.
But in the volatile small-cap sector, fortunes can reverse very quickly, so the read-through is limited.
Value strategies faced similar headwinds to their large-cap counterparts as the market sought comfort in earnings certainty and sold down deep cyclicals.
Performance was also weaker further down the market-cap spectrum, where limited liquidity experienced even wider price gyrations.
The worst performers in the category were Allan Gray Australian Equity, which suffered from its substantial overweighting to energy stocks; CFS Wholesale Developing Companies, which plays at the very small and micro-cap end segment of the market; Perennial Value Smaller Companies Trust, which holds a number of very small names and is also overweight in consumer cyclical stocks.
About the author

About the author


Stock market
Ethical investing tipped to drive ETF market
Following a volatile 2020 where investors poured into ETFs, shareholders are tipped to focus on ethical investing and technology as the recovery from the COVID-19 pandemic continues, an industry expe...Read more

Stock market
‘The concept of collective investing is here to stay’
The phenomenon of retail investors acting as a collective, led by social media and celebrity investors, is here to stay, says one expert. ...Read more

Stock market
What is short selling and should you do it?
Short selling stocks may sound like a good investment strategy when you’re after quick and big returns, but is it worth the risk? Here’s a rundown of why shorting stocks may not be a sound stock t...Read more

Stock market
How much insider trading really happens?
There are at least four times as many people who get away with insider trading than the number of those caught by prosecutors, new research has revealed. ...Read more

Stock market
Why you should be wary of the tech stock bandwagon
After a strong year of tech stock gains, tech shares have been on a decline in recent weeks as increasing bond yields rattle equity markets. ...Read more

Stock market
GameStop set to release first earnings since Reddit stock market rally
The video game retailer at the centre of the WallStreetBets saga is set to post its first quarterly market update since the fiasco began, with social-media investors heavily tipped to continue backing...Read more

Stock market
What is thematic investing and why it could be a fad
Long-term investors are being urged to ignore market fads and instead focus on identifying major socioeconomic, environmental and technological themes, an industry expert has explained. ...Read more

Stock market
ASX 300 companies cash in on JobKeeper scheme
Most of Australia’s ASX 300 companies that received JobKeeper payments did not need the subsidy as they recorded increases in profits throughout the calendar year, according to a study. ...Read more

Home values up 30% (or are they); NFTs taking the world by storm, and why Keating thinks Aussies will be ‘poor’ in retirement
Listen now

Raging floods, the tech stock bubble and the ongoing SG debate
Listen now

Meet the Manager with Trilogy’s Philip Ryan: RBA rates and property price growth
Listen now

The continued property boom, ethical investing and engaging with your super fund
Listen now

Stock market
Ethical investing tipped to drive ETF market
Following a volatile 2020 where investors poured into ETFs, shareholders are tipped to focus on ethical investing and technology as the recovery from the COVID-19 pandemic continues, an industry expe...Read more

Stock market
‘The concept of collective investing is here to stay’
The phenomenon of retail investors acting as a collective, led by social media and celebrity investors, is here to stay, says one expert. ...Read more

Stock market
What is short selling and should you do it?
Short selling stocks may sound like a good investment strategy when you’re after quick and big returns, but is it worth the risk? Here’s a rundown of why shorting stocks may not be a sound stock t...Read more

Stock market
How much insider trading really happens?
There are at least four times as many people who get away with insider trading than the number of those caught by prosecutors, new research has revealed. ...Read more

Stock market
Why you should be wary of the tech stock bandwagon
After a strong year of tech stock gains, tech shares have been on a decline in recent weeks as increasing bond yields rattle equity markets. ...Read more

Stock market
GameStop set to release first earnings since Reddit stock market rally
The video game retailer at the centre of the WallStreetBets saga is set to post its first quarterly market update since the fiasco began, with social-media investors heavily tipped to continue backing...Read more

Stock market
What is thematic investing and why it could be a fad
Long-term investors are being urged to ignore market fads and instead focus on identifying major socioeconomic, environmental and technological themes, an industry expert has explained. ...Read more

Stock market
ASX 300 companies cash in on JobKeeper scheme
Most of Australia’s ASX 300 companies that received JobKeeper payments did not need the subsidy as they recorded increases in profits throughout the calendar year, according to a study. ...Read more