Australia, July 19, 2021 – The banking sector has rebounded from being among the worst performers of the 2020 financial year (FY) to among the best for the 2021 FY, as revealed in Mercer’s Australian Shares Investment Manager Performance Survey. The survey also demonstrated the continued recovery of Value stocks, and the outperformance of active management.
The second quarter of 2021 was strong for equity markets with the S&P/ASX 300 returning 8.5% and the corresponding S&P/ASX 50 index, 8.2%. IT and Consumer Discretionary were the leading sectors delivering double digit growth respectively over the quarter, followed next by Communication Services. Over the one-year time horizon the S&P/ASX 300 returned 28.5%, while the ASX Small Ords returned 33.2%.
Banks reaped the benefits of a strong economic recovery, in particular an improved outlook for bad debts and overall asset quality as the predicted loan losses from the pandemic failed to materialise. Alongside Financials, Materials was also a leading contributor to index returns, buoyed by the Chinese economy’s rebound and resulting high iron ore prices.
At an individual stock level, CBA was the largest stock contributor over the financial year, followed by ANZ, Fortescue, BHP, NAB and Westpac.
Ronan McCabe, Head of Portfolio Management for Mercer in the Pacific said, the last 12 months was a story of two halves.
“While the second half of 2020 was a strong period for Quality/Growth managers, as markets rallied from the March 2020 Covid lows, the last six months of the financial year have seen a recovery in Value stocks, and in particular Financials and Materials,” said Mr McCabe.
“Cyclical stocks in the Financials, Materials and Consumer Discretionary sectors typically outperform the market as they are able to benefit from the upswing in earnings and profitability. Stocks that are more sensitive to the economic cycle have seen earnings recover strongly and share prices soar.”
Mr McCabe said the surveys continued to demonstrate the importance of active management.
“Quarter after quarter, we are seeing strong performance from top quartile managers who are beating the benchmark by sizeable margins over the one-year, three-year and five-year time horizons. And, both Value and Quality/Growth styles have done well at different times. These results support the case that active management from high quality managers enhances portfolios. It’s clear that it pays to have diversified managers and styles across investors’ portfolios,” said Mr McCabe.
Over the one-year time horizon:
-ENDS-
Australian Shares – All Funds
Five above-median funds in the past 12 months to end June 2021 (alphabetical order)
Fund |
Style |
Contributors to benchmark outperformance |
Bennelong Core Equities |
Quality/Growth |
· Consumer Discretionary |
ECP AM All Cap |
Quality/Growth |
· Consumer Discretionary · Information Technology |
Hyperion Australian Growth |
Quality/Growth |
· Communication Services · Information Technology |
Maple-Brown Abbott Australian Share |
Value |
· Financials · Materials |
Perpetual Australian Share Fund |
Value |
· Consumer Discretionary · Materials |
Five below-median funds in the past 12 months to end June 2021 (alphabetical order)
Fund |
Style |
Contributors to benchmark underperformance |
AB Managed Volatility Equities |
Low Volatility |
· Consumer Staples · Financials (underweight) |
Acadian Australian Equity Managed Volatility |
Low Volatility |
· Consumer Staples · Financials (underweight) |
Martin Currie Australia Real Income |
Value |
· Real Estate |
Plato Australian Shares Low Volatility Income |
Low Volatility |
· Consumer Staples · Financials (underweight) |
State Street Australian Equity Fund |
Low Volatility |
· Consumer Staples · Financials (underweight) |
Key Findings
About Mercer
Mercer believes in building brighter futures by redefining the world of work, reshaping retirement and investment outcomes, and unlocking real health and well-being. Mercer’s approximately 25,000 employees are based in 43 countries and the firm operates in 130 countries. Mercer is a business of Marsh McLennan (NYSE: MMC), the world’s leading professional services firm in the areas of risk, strategy and people, with 76,000 colleagues and annual revenue of $17 billion. Through its market-leading businesses including Marsh, Guy Carpenter and Oliver Wyman, Marsh McLennan helps clients navigate an increasingly dynamic and complex environment. For more information, visit www.mercer.com.au. Follow Mercer on Twitter @MercerAu and LinkedIn.