With the release of its latest Australian Shares Investment Manager Performance Survey on Friday, Mercer reported COVID-19 has accelerated the trend towards e-commerce and online activity, fuelling the rally in the likes of fintech Afterpay and e-commerce logistics company Goodman Group.
Meanwhile the median manager generated higher returns than the S&P/ASX 300 Index during the first quarter of financial year 2021, continuing its outperformance from the prior quarter. The median manager’s performance outperformed the index in the September quarter by 0.6 per cent, with top-quartile managers outperforming by as much as 2 per cent.
However, the gap between upper and lower quartile managers was reported to continue widening over the 12 months ending in September, compared to the one-year period ending in June.
Ronan McCabe, head of portfolio management for Mercer in the Pacific said tech has continued to outperform the broad market during the “turbulent” first nine months of the year.
“Long-term secular trends that had been expected to play out over the next number of years have been accelerated since COVID-19, such as e-commerce, remote working and data warehouses performed well, as opposed to physical retail,” Mr McCabe said.
The survey found healthcare and IT allocations were the key contributors to positive performance in the last year, while energy and financials were the major headwinds.
Investment managers that had exposure to high growth and quality companies did better than value-based managers.
Bennelong’s Concentrated Equities and Core Equities funds, ECP Asset Management’s All Cap, Hyperion Australian Growth and Platypus Australian Equities were the five upper quartile funds in the year to 30 September. All five were quality/growth and either held healthcare, IT or consumer discretionary stocks.
Over the one-year horizon, the top quartile investment managers outperformed the market index by 4.6 per cent.
Meanwhile Allan Gray Australian Equity, Dimensional Australian Value, Lazard Select Australian Equity, Martin Currie’s Australia Real Income and Nikko AM Australian Share Wholesale Fund were all at the bottom, as the five lower quarter funds in the year to September.
All five had a value style and were dragged by lower performances through energy, financials and real estate.
“Stocks focused in healthcare and IT have been the winners through COVID-19 as we’ve seen quality/growth continue to outperform value,” Mr McCabe said.
“Typically in a sell off and recession we can expect to see value perform better, but this time it hasn’t been the case. However now is not the time to write off value and investors should seek to retain value exposure in their portfolios through the cycle.”
Other ongoing influencing factors included the recent Australian federal budget, which had a strong focus on reinvigorating the country’s economy through an emphasis on job creation and business investment.
The US elections in early November may prove to cause volatility before and after, adding to the ongoing uncertainty around the timing for a COVID vaccine.
“Looking at the last seven US presidential elections, the median Australian shares investment manager generally outperformed the broad index in both the three months leading up to the election and the three months after the election,” Mr McCabe said.
“However, as the 2016 election showed, the equity market can react unpredictably to political outcomes. Volatility could increase as the election approaches and the market discounts potential policy changes.”
