The performance of global equity managers which have Australian-domiciled funds has picked up from the terrible period over 2008 and 2009 but remains less rewarding than the experience for US-based investors over a long period. Data from Mercer Investment Consulting shows that the average active global manager offering $A strategies outperformed the MSCI by 1.3 per cent on rolling three-year numbers between December 1988 and March 2010. This compares with an outperformance of 2.3 per cent for US$ global managers on the same basis between December 1990 and March 2010.

The two sets of data are not strictly comparable because of the slightly different time periods and, more so, because the manager universes are not the same. However, they provide an interesting guide for super funds which may be questioning their active global managers after their experiences in 2008 and 2009. As the charts indicate, outperformance by the average active global manager has declined in recent years, where their funds are domiciled, but picked up slightly in recent months. For A$ global funds, there had been 11 straight months of underperformance by the average manager, between September 2008 and July 2009, based on one-year rolling returns. Since then, the average manager has outperformed in each consecutive month.

For Australian equities managers, the outperformance over the long period has been a little better, averaging 1.5 per cent on both 12-month and three-year rolling numbers between February 1989 and May 2010. According to David Carruthers, a Mercer principal, there has been a lot of analysis going back a long way which shows that managers do not do better or worse, on average, in either up or down markets. “What’s more important,” he says, “is the cross-sectional volatility. When the market is more volatile there seems to be more outperformance by active managers.”

He said that, intuitively, you would think that global managers which went to the trouble of opening an Australian office and having Australian-domiciled funds would have better performance than those which didn’t. Although the universes of the “global global” and “Australian global” are different, the numbers do not indicate any better performance by those which have set up shop here. Carruthers warned not to pay too much credence to averages, though, which could be misleading. “We think we are good at picking good managers. We hope to do this so that it is more than just a 50:50 bet.”

Leave a comment