S&P Dow Jones Indices has released the latest iteration of its SPIVA Australia Scorecard reports, which measures the performance of Australian actively managed funds against their respective benchmarks.
Australian Equity A-REIT funds struggled over the first half of the 2023 calendar year, with 88 per cent underperforming the S&P/ASX 200 A-REIT index – the highest rate of underperformance among reported categories.
The S&P/ASX 200 A-REIT index grew 3.9 per cent over the period, while active funds gained an average of 2.8 per cent on an equal-weighted basis and 2.5 per cent on an asset-weighted basis.
Subdued fund performance followed a period of volatility in the property market off the back of aggressive monetary policy tightening from the Reserve Bank of Australia (RBA) and evidence of a slowdown in aggregate economic activity.
The commercial property sector, particularly the office and retail spaces, has also come under the spotlight, with changing workplace and consumer dynamics calling into question its long-term viability.
Most large-cap equity funds underperform ASX 200
The report revealed 55 per cent of large-cap Australian General Equity funds underperformed the ASX 200 index, which grew 4.5 per cent over the first half of the 2023 calendar year (YTD).
This represented a 5-percentage point increase when compared to the previous corresponding period – a 50 per cent underperformance rate over the first half of 2022.
When increasing the time horizon, the share of underperforming funds increased to 81 per cent, 79 per cent, and 81 per cent over five, 10, and 15 years, respectively.
Fewer Australian equity mid and small-cap funds underperformed over the first half of the year (48 per cent) against their respective benchmark – the S&P/ASX Mid-Small index – which grew 3 per cent.
But underperformance levels across small and mid-cap funds also increased over the longer-term (albeit less pronounced than large-cap funds), rising to 64 per cent and 76 per cent over the five and 10-year time horizons.
Meanwhile, according to the S&P analysis, almost three quarters (74 per cent) of International General Equity Funds failed to outperform their benchmark – the S&P Developed Ex-Australia LargeMidCap – which grew 18.1 per cent over the first six months of 2023.
Materials, IT lead equity market recovery
Despite a period of turbulence in March and April of 2023, equities markets broadly recovered from sustained underperformance over the course of 2022.
According to the S&P SPIVA analysis, the materials sector led the recovery, contributing 1.2 per cent of the 4.5 per cent in overall gains in the S&P/ASX 300 index.
Industrials (0.66 per cent), information technology (0.63 per cent), and consumer discretionary (0.58 per cent) also made strong contributions to the overall recovery.
Meanwhile, the main contributors to gains in the S&P Developed Ex-Australia LargeMidCap index were the information technology (8.5 per cent), consumer discretionary (3.2 per cent), and the communication services (2.1 per cent) sectors.