Source: Delta Research & Advisory

The above chart shows the performance of the value risk factor, which is simply calculated as the performance of the MSCI Australian Value index minus the performance of the MSCI Australian Growth index. With an ending value great than 15% than the starting value, clearly the 2013 financial year was a great year if your style was “value” biased. When you consider the “chase for yield” theme given low interest rates, this should be unsurprising as the MSCI Value index contains a strong bias towards high dividend paying stocks. So if you bought the ASX200 index you would have received a little more than 22% for the year to June 2013, plus if you were 100% long the value index and shorted the growth index you would have received another 15% to provide a stellar return of 37%…so it probably makes sense that the best performing Australian share managers of 2013 financial year probably had this value bias…surprisingly that’s not necessarily the case.

Source: Delta Research & Advisory

The above chart shows the managers who are most exposed to “value”. Each line represents their rolling 3 year utility to the value premium and what is most interesting is…

• The Lazard funds, Hyperion Growth (they may need to rename), and to a lesser degree Perpetual Ethical all rode the value wave until May and reduced their exposure to value which was excellent timing as the value premium went backwards over the last 2 months of the financial year.
• Hyperion doesn’t appear to be a value manager necessarily but the shape of its Value exposure appears to be well-timed compared to the pure performance of the value premium as they both accelerated from January.
• Not surprisingly the Antares Dividend Builder has the highest exposure to Value…but its exposure was not diminished over May and June and that would have really hurt it…in fact it lost more than 8% in May alone…ouch!

Source: Delta Research & Advisory

The remaining funds (or at least the ones with sufficient performance history assuming I could get it…so nothing on Tyndall, sorry Luke, or UBS Halo, short timeframe there) don’t really have a strong value bias at all. Despite a different title to the second chart in this post, the final chart shows more of a growth bias (Bennelong) or no bias at all (everyone else). These are the funds that have really relied on their stockpicking skills, luck, or other drivers of performance as their style bias has not helped at all.

The surprising results here include…

• Just because its Perpetual doesn’t mean it  has a “value” style
• the fact that more of the top funds do not have a “value” bias despite a cracker of a “value” year
• quite a few of these funds appeared to have sold off their “value” holdings similar to Lazard and Hyperion

To be honest I’m not really sure what I’ve learnt from this analysis so i’ll leave it to you to decide.

Anyway my disclaimer once again is, under no circumstances am I recommending or not recommending any of the above-mentioned investments to the reader. Their recent strong performance could easily reverse as could their above-mentioned styles. If you do choose to invest in any of these funds and they don’t work out…don’t blame me!!!

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Source: Australian Financial Review

The above table was published in yesterday’s Australian Financial Review (the sourced link takes you there but you may need a subscription) and Lazard Select Equity is the top performer over the last 12 months, and from the other funds in this table, its number one over the past 3 years too. So I thought I’d have a look to see how Lazard’s alpha (or market risk and style-adjusted skill/outperformance) has really been over time.

So…as the below chart shows, Lazard has had some significant bouts of tough times and its numbers have only really looked great over the last 6 months. In fact, if you delve deeply…and I don’t have the charts available for posting yet…it is only the last 6 months performance that have truly contributed to high returns…not that there’s anything wrong (or necessarily right) with that.

One final positive (or negative depending on your view) for Lazard and a personal observation based on my analysis…its Select fund appears to have taken on the most idiosyncratic risk (or is prepared to move furthest away from the S&P/ASX200) of every fund in the list. So it definitely takes the biggest bets and they’ve finally paid off this year. Also, with the exception of the Wavestone Long/Short fund, Lazard Select also has had the lowest exposure to the market (i.e. low beta) which is quite interesting as high beta has been an absolute winner over the past 12 months…and you only have to look at the performance of some of the geared share funds as evidence to that point. So without talking to Lazard, I’m pretty confident they make big bets and those big bets have worked this year…but will they continue??? Who knows.

Source: Delta Research & Advisory

More analysis to come of this interesting table.

I probably should put a disclaimer in…no personal circumstances have been considered in conducting this analysis and under no circumstances am I recommending or not recommending Lazard funds…this is simple factual analysis and not much more…oh yeah…obviously past performance does equal future performance!

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