Comments from the US Federal Reserve that it would be tapering its asset purchase program provided another key theme, according to Morningstar’s quarterly managed fund performance league tables.
“The sharp fall in the Australian dollar led to international share funds dramatically outpacing other asset classes,” Morningstar senior research analyst Brook Sweeney said.
“From here, however, the words and actions of central bankers will continue to determine the direction of investment markets.”
With the decline in the Australian dollar over the quarter, unhedged international funds outperformed their hedged counterparts and have outperformed Australian shares over the one, three, and five years to 30 June 2013, Morningstar found.
However, only 20 of the 73 unhedged international equities funds managed to exceed the benchmark net of fees, and all investment styles underperformed on average, the research found.
For local investments, more than half (66 of 103) of large-cap Australian share funds beat the market in the quarter, with value-style managers the best performing.
Small caps experienced a bumpy ride, with managers exposed to small caps' resources performing poorly. And even though 41 of 46 beat the index, only three of the funds reviewed rose in value over the quarter, Morningstar found.
Australian listed property returned 3.19 per cent in the quarter and strongly outperformed the broader Australian equities index. Only 10 of the 35 domestic listed property funds in the survey beat their benchmark.
Australian fixed interest funds achieved “meagre and tightly-clustered returns” over the quarter, with global bond funds typically underperforming their domestic counterparts and the average manager underperforming the benchmark, Morningstar found.
