Opalesque Industry Update - According to Chris Gosselin, C.E.O. of Australian Fund Monitors Pty Ltd in Sydney, the current markets, whether they be equity or alternative, are proving to be testing times.|
Although on a 12 month basis ASX 200 is still in positive territory, up 5.86%, over the 11 months period of September 2009 to the end of July 2010 the ASX 200 has gone nowhere. However that statistic obscures intra-month volatility which has tested fund managers, and long-suffering investors, with some wild swings.
In the past year the ASX 200 has made monthly gains or losses in excess of 5% on six occasions, with the 12% rally for August/September last year offset by the decline of a similar size from April to June 2010.
These are obviously not markets for trend followers. At the same time picking the timing of the market's next rise or fall has not been easy given the abrupt nature of directional changes.
Stock picking has been no easier, as has been shown in the past couple of weeks by the likes of Commonwealth Bank, Telstra, AWB and Leighton. This makes it interesting to look through managers' performance reports to see those which highlight positive performance from a particular earnings surprise or event, offset by another manager's negative performance from the same event.
So while it's been tough, it's been encouraging to see equity-based hedge funds at least make headway of close to 10% while the market has bounced up and down on the same spot. In addition year-to-date they have outperformed the ASX by close to 8%. That's not to say that there hasn't been significant monthly volatility within the hedge fund sector, and some significant under and over performance by particular funds.
15% of all funds in the AFM database turned in a negative performance over the past 12 months, whilst at the other end of the spectrum a similar percentage returned over 25%. Some managers that had previously provided stable results started to show that they were not infallible, whilst others continued to provide the consistency we had come to expect.
So while the markets are continuing to test fund managers, some managers' performances are continuing to test investors.