"A key factor influencing fund performance during 2010 was the disparity in returns delivered by small, medium and large-cap stocks," Lonsec investment analyst Andrew Scifo said.
In regard to fund flows, investors favoured passive managers with those products employing active strategies experiencing flat flows.
"The increasing popularity of ETFs (exchange-traded funds) and availability of SMAs (separately managed accounts) has created increased competition for the traditional managed fund," Scifo said.
In all, the performance of the sector as measured by the S&P/ASX300 Accumulation Index during 2010 was modest, providing investors with a gain of 1.9 per cent.
The research house assessed 36 active funds in its review of the sector.
Of this group, 10 funds, including the Ironbark Karara Australian Share Fund, Perpetual Concentrated Equity Fund and CFS Australian Share Core Fund, were awarded the top rating of highly recommended.
