ESG wholesale managed funds challenge broader market

Rainmaker Information

ESG-aligned wholesale managed funds continue to outperform in the managed funds market, reveals latest research from Rainmaker Information.

They outperformed in all Australian sectors and delivered third-in-class returns for the three years to August 2020, according to Rainmaker’s latest Wholesale Managed Funds Report for August 2020.

Large cap international equites topped the sectors with a median return of 10.2% p.a., followed by the growth asset sector delivering a median return of 7.0% p.a.

Australian equities sectors struggled relative to internationals, with the income focused and small cap Australian equities managed funds the worst performing.

Interestingly, both Australian and international large cap sectors were strong through the three years to August.

“Even though stock markets were at record highs, more than three-quarters of Russell 3000 stocks were still below their 52-week highs,” said John Dyall, head of investment research at Rainmaker Information.

The top performing individual product was the Lakehouse Small Companies Fund that delivered a return of 29% p.a. for the three years to August 2020.

Rounding out the top three performing funds were the Loftus Peak Global Disruption Fund and BetaShares Global sustainability Leaders ETF, each producing returns of 24.2% p.a. and 23.5% p.a. respectively for the three-year period.

The ESG sector emerged as the third best performing sector with a median return of 6.3% p.a. across the three years with the BetaShares Global Sustainability Leaders ETF well placed among the top performing products overall.

“Driving the returns was the unusually high contribution from large cap stocks,” said Dyall.

“The top 10 contributors have been more influential in the past 12 months than they have been in the past 10 years,” said Dyall.

ESG investment options continues to dominate the performance conversation among the Australian wealth management industry, with Australian Ethical offering the best performing superannuation product across the three years to end August 2020 and ESG ETPs’ funds under management eclipsing the $1.8 billion mark in June 2020.

There is clearly a thirst by investors to align themselves with companies that follow ESG principles either directly or indirectly.

The top performing products across each wholesale managed fund asset sector are listed below:

Sector

Top performing products

Three year performance

(% p.a.)

Sector median

(% p.a.)

Australian Equities Small Cap

Lakehouse Small Companies Fund

29.00%

8.90%

International Equites Large Cap

Loftus Peak Global Disruption Fund

24.20%

10.20%

ESG

BetaShares Global Sustainability Leaders ETF

23.50%

6.30%

Australian Equites Large Cap

Australian Unity Platypus Australian Equities

17.30%

5.60%

Combined Property

Australian Unity Diversified Property

14.60%

3.00%

International Equities Emerging Markets

Fidelity Global Emerging Markets Fund

13.10%

5.10%

Australian Equities Income Focused

Plato Australian Shares Income Fund

8.50%

0.80%

Growth

IOOF MultiMix Growth Trust

8.40%

7.00%

Balanced

Macquarie Balanced Growth Fund

7.90%

5.60%

Dynamic Asset Allocation

Legg Mason Martin Currie Tactical Allocation Fund

7.10%

3.40%

Capital Stable

Macquarie Capital Stable Fund

6.70%

4.00%

Credit

Principal Global Credit Opportunities Fund

6.60%

3.80%

Australian Fixed Income

Ardea Real Outcome Fund

6.20%

5.60%

International Fixed Income

Schroder Fixed Income Fund

6.20%

4.10%

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