The latest Mercer Australian Shares Investment Manager Performance Survey has captured a reversal of the two prior quarters in the last three months of 2020, while the top three sectors were energy, financials and IT.
Ronan McCabe, head of portfolio management for Mercer in the Pacific noted the final stretch had been strong for equity markets, with the ASX 300 returning 13.8 per cent and the ASX 50 giving 13.2 per cent.
“Rebound in oil prices and easing of restrictions on bank dividends, in addition to improving economic outlook, were drivers of performance,” Mr McCabe said.
“Value-esque stocks such as Woodside Petroleum, Rio Tinto, BHP, CBA, ANZ and NAB were the largest contributors to strong performance. While value has had a tough time over the past few years, our perspective is that investors should seek to retain some value exposure in their portfolios through the cycle.”
Investment managers banking on technology came out on top for the full year, with the survey revealing the growth-dominant IT sector returned more than 50 per cent over 2020.
Tech stocks had been fuelled largely by trends towards online activity that were accelerated by COVID-19, Mercer noted.
Consumer discretionary was another strong sector, as a result of online activity rather than physical retail, while materials also rose, driven by the recovery in China with Fortescue, Rio Tinto, BHP and Pilbara performing well during the last quarter.
The five upper quartile funds in the 12 months to December were Bennelong’s Concentrated Equities and Core Equities funds, ECP Asset Management’s All Cap, Hyperion’s Australian Growth and the Platypus Australian Equities fund.
The funds had been boosted by exposure to healthcare, consumer discretionary and information technology.
Meanwhile, the five lower quartile funds were Allan Gray Australian Equity, Investors Mutual Equity Income, Lazard Select Australian Equity, Martin Currie Australia Real Income and the Nikko AM Australian Share Wholesale Fund.
The common contributors to underperforming were energy, communications services, real estate and financials.
Further, active managers held up during a tumultuous year – the median manager was slightly above benchmark at 0.1 per cent higher, while top-quartile managers outperformed the standard by 2.5 per cent over the quarter and 3.9 per cent over the year.
“Over three years and five years, the top quartile managers beat the benchmarks by 1.2 per cent and 1.3 per cent respectively,” Mr McCabe said.
“This evidences the role of active management in investors’ portfolios.”
