Australian managed funds continued a growth rally which began in mid-2012 into the first quarter of 2013, but on average underperformed their respective indices, according to Morningstar data.
Morningstar's Managed Fund Performance League Tables found funds heavily invested in major international share markets posted positive gains, with the only drag here being in the emerging market.
However, few managed to beat the market, with around only one third of the funds survey exceeding the benchmark.
"It was a challenging period for fund managers, as the average manager in the majority of categories failed to surpass benchmarks," said Morningstar senior research analyst Julian Robertson.
The March quarter was also good for global listed property which gained nine per cent. But again, no manager beat their yardstick and on average lagged by around two per cent.
The worst areas of growth were those with heavy fixed interest holdings, with Australian bonds up only 0.16 per cent - marginally above what you would get from cash.
The best managers were those that had strong exposure to either large or small Australian caps. Over half of the large cap Australian share funds managed to beat the market. Small caps performed even better with over 90 per cent of the firms surveyed beating the index.
Morningstar predicted the rosy picture for equities could potentially change for the worse should they be unable to justify their valuations.
"Investors appear to be fairly sanguine and continue to chase down yield which may provide support for some risk assets," Mr Robertson said.
"However, with valuations having risen and no longer looking as attractive, it's difficult to see which way the market might go in the next few months," the Morningstar report concluded.
