The data from Australian Fund Monitors compared the performance of actively managed funds with a long-term track record versus those that were relatively new to the market, and found that newer funds tended to outperform the market at a higher rate.
Across the 34 managed funds that were less than seven years old at 30 June 2021, the average outperformance of the ASX200 Total Return Index was 5.29 per cent a year, compared with 0.8 per cent per year average outperformance for the 58 funds that were more than 12 years old.
Looking at even newer funds, outperformance was slightly stronger, with the 19 funds started in the last five years producing an average annual outperformance of 5.57 per cent.
Meanwhile, the average outperformance across the 30 funds with a track record of more than 18 years was just 0.41 per cent.
By carrying out the same analysis at the end of the previous five financial years, the data revealed that the same trend occurred in every year except 2019, when both older and newer funds underperformed the index.
The firm said while research houses typically did not rate managed funds with less than a three-year track record, and therefore these newer funds could not be accessed by many retail investors, the data revealed that this prejudice against newer funds could be detrimental to an investor’s portfolio.
“This data clearly supports the ideal that while early-stage managers may carry some business risk, there can be great opportunities to access strong returns, and that relying on waiting for a manager to gain an adequate track record may affect the long term performance of portfolios,” the group said.
