The scorecard, which measures the consistency of outperformance among actively managed mutual funds, found that over the three or five years ending in June 2022, very few actively managed equity, A-REIT and fixed-income funds were able to maintain consistent outperformance relative to their peers.
Over a five-year horizon, S&P said it was “statistically near impossible” to find consistent outperformance.
“Within each of the reported fund categories across Australian Equity General, Australian Equity Mid and Small-Cap, International Equity General, Australian Bonds and Australian Equity A-REIT, among all the funds whose performance placed them in the top quartile for the 12 months ending June 2018, not a single fund managed to remain in the top quartile for the next four years,” the report said.
“On the other hand, lowering the bar from the top quartile to the top half yields tentative evidence of persistence among a fraction of funds within the Australian Bond funds category.”
Only 10 per cent of active funds in the Australian bond category were able to repeat their top-half status over four consecutive five-year periods. All other fund categories were well below this mark, with Australian equity general at the back of the pack at just 0.6 per cent.
In contrast, S&P said that over the long term, poor performance has proven to be a reliable indicator of future fund closures.
“Across the five categories reported by our Scorecard, an unweighted average of 38 per cent of actively managed funds whose performance placed them in the bottom quartile of performance in the five years ending in June 2017 were subsequently merged or liquidated over the next five years, while the comparable figure for funds whose performance placed them in the top quartile of performance of their category in the five years ending in June 2017 was just 14 per cent,” the report said.
In March, S&P found that the majority of Australian active funds beat their benchmarks in 2021 but continued to underperform over the longer term.
Australian equity general funds gained 18.4 per cent on an equal-weighted basis and 18.9 per cent on an asset-weighted basis in 2021, beating the 17.2 per cent gain for the S&P/ASX 200.
