Oct 14

Australian Equity Manager’s Investment Style…maybe not all true to label

Its been a little while since I wrote anything on managed fnds. Yesterday I attended a series of presentations at Griffith University whereby undergrad students presented results of their previous few months working in financial services. Some of the results were very interesting including how many global fund managers demonstrated a different investment style than they claimed. So with this inspiration this afternoon I quickly whipped up a bit of Fama French 3 factor analysis of some of the more popular funds in Australia and my results are in the table below.

The data used in this analysis is monthly data from June 2003 to September 2011, so 99 months in total. Only Tyndall and Dimensional’s Large Cap fund failed to generate any risk-adjusted alpha. As expected the Market Beta is high for all funds, less so for Investors Mutual (IML) with a market beta of 0.77 (might be a little more flexibiility in their mandate I suspect).

HML is a factor which is effectively buying the growth index and shorting the value index, hence if the beta is negative it reflects the manager’s value bias and if positive, growth bias. The interesting results with regards to HML are…

  • Tyndall claims to be a value manager but shows an insignificant value bias
  • Dimensional Aust Value is strongly value biased as you would expect from a Fama French influenced manager as is Investors’ Mutual…both true to style
  • Fidelity, BT and Ausbil each have a growth bias and this is not surprising based on their stated styles
  • Perpetual, however show a significant bias to growth despite claiming to be a value manager…perhaps its tought to stick to your style when your so big…not sure

The final factor, SMB, is the equivalent of buying the MSCI Small Cap index and shorting the market which is large cap biased. The results show that all managers extract some of their return from the small cap space with Dimensional, unsurprisingly, showing the strongest bias to small caps.

So, this 8 year analysis shows Tyndall and Perpetual may be a little suspect with regards to their style. From a portfolio construction perspective, with their strong levels of skill and relative opposite styles it looks like combining Fidelity Australian  and Dimensional Australian Value funds may be a combination worthy of consideration.

My disclaimer…past returns do not equal future returns so everything I just wrote could turn out to be completely wrong in the future…so don’t act on this analysis without seeking professional advice!!!


   Send article as PDF   

1 pings

  1. » Australian Equities Fund Manager Style over time Fureyous

    […] couple of weeks ago I did a post showing Fama French 3 Factor analysis on some of the leading Australian Equities fund managers. The analysis covered returns from June […]

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

This site uses Akismet to reduce spam. Learn how your comment data is processed.


Get every new post on this blog delivered to your Inbox.

Join other followers: