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A-REITs flying the active flag: S&P

A-REITs flying the active flag: S&P

Tim Stewart
— 1 minute read

The majority of A-REIT fund managers outperformed their benchmark in 2017, while most equity and bond managers underperformed, according to a new report.

The latest S&P Dow Jones Indices SPIVA report has found that, with the exception of A-REITs, a majority of Australian active managed funds categories underperformed their indices in 2017.

The biannual report regularly finds that most fund managers fail to beat their benchmarks over one, three, five and 15-year periods.

Over 2017, the majority of Australia's equity funds, mid and small-cap funds, international equity funds and bond funds underperformed their respective indices.

The one exception was A-REIT funds, of which 56 per cent outperformed the S&P/ASX 200 A-REIT index throughout 2017.

A-REIT managers produced an average return of 6.8 per cent in 2017, compared with the 5.7 per cent return of the index.

However, over longer time horizons of three, five and 15 years, most A-REIT funds underperformed the index (66 per cent, 84 per cent and 78 per cent, respectively).

The S&P report also looks at fund survivorship, a measure that affects the number of active managers that beat their indices over the long term.

Throughout 2017, 6.2 per cent of Australian funds from all measured categories in the SPIVA report were merged or liquidated.

Australian large-cap funds disappeared at the fastest rate, while Australian bond funds recorded a 100 per cent survival rate (however, over 15 years, bond funds had the lowest survival rate at 33 per cent).

Commenting on the report, S&P said: "There is no consistent trend in the yearly active versus index figures, but we have consistently observed that the majority of Australian active funds in most categories fail to beat the comparable benchmark indices over long-term horizons."

"While the report will not end the debate on active versus passive investing in Australia, we hope to make a meaningful contribution by examining market segments in which one strategy works better than the other."

 

A-REITs flying the active flag: S&P
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