EXECUTIVE SUMMARY
- While comparing active funds against a benchmark index is a typical practice used to evaluate their performance, persistence is an additional test that reveals fund managers’ skills in different market environments.
- In this report, we measure the performance persistence of active funds that outperformed their peers and benchmarks over consecutive threeand five-year periods, and we analyze their transition matrices over subsequent periods.
- A minority of Australian high-performing funds persisted in outperforming their respective benchmarks or consistently stayed in their respective top quartiles for three consecutive years, and even fewer maintained these traits consistently for five consecutive years.
- Over two successive three- and five-year periods, the majority of outperforming funds failed to beat their respective benchmarks, and most funds in the top quartile did not remain there consistently.
- Only 1.1% of the high-performing funds in 2013 maintained a topquartile rank over the subsequent four consecutive years, and only 1.0% of funds consistently beat their benchmarks over five consecutive years across all fund categories.
- The Australian Bonds category had the lowest turnover in the top quartile, while no funds in the Australian Equity General, International Equity General, or Australian Equity A-REIT fund categories managed to stay in the top quartile over a consecutive five-year period.
- Apart from the Australian Equity General category, not a single fund from the other categories managed to outperform the benchmark consistently over five consecutive years.
- Overall, results from various evaluation matrices suggest weak performance persistence for top-performing funds in Australia across three- and five-year periods.
