A 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 2003 to September 2011 so it obviously covered a mixture of markets…bull bear and sideways. I just completed the same analysis but this time I divided the data into three distinct markets…
- Bull Market from 2003 to the end of October 2007
- Global Financial Crisis bear market from the end of October 2007 to its bottom at the end of February 2009
- The GFC recovery since the end of February 2009 to September 2011
The updated results are…
Data Source: van Eyk, Morningstar
My factor descriptions are…
- Annualised Alpha is effectively the skill the manager brings after all factors are considered…e.g. it includes their market timing skills
- Market Beta – represents the fund’s volatility relative to the market’s. So a Market Beta of 1 means the fund’s performance moves in sync with the market’s
- HML – this factor is long MSCI Australia Growth and short MSCI Australia Value…so if the results are positive then chances are the fund is a “Growth” fund and “Value” is negative
- SMB – this factor is Long Small Caps and Short the ASX200…therefore a positive result shows a small cap bias relative to the market
I haven’t produced the statistical significance of each factor but I have highlighted the significant results for the HML factor. These results indicate some consistency of style across at least 2 of the 3 markets from DFA Australian Value and Investor’s Mutual (IML) which are both value biased; BT, Fidelity, and Ausbil which are each growth biased; and Tyndall, Perpetual, and DFA Large Cap which don’t appear to be either value or growth biased although Tyndall has a growth bias in the bull market preceding the GFC.
I’m not so sure Perpetual and Tyndall will agree with me on that given they both state they are value managers but the results are the results. Both of these managers also appear to have a greater small cap bias than all others (except DFA Aust Value) so I guess that is where their focus has been. Whilst they may claim to be “value” managers they appear to be a little more focused in small cap land than their competitors…something to keep in mind when considering their portfolio inclusion.
Unsurprisingly all managers shows high market betas, which is a typical characteristic of well diversified long only managers so when the market goes down (or up) so too do these funds.
In terms of what combinations may be best…its looking like Fidelity combined with either IML or DFA Aust Value.