Best Performing Managed Funds in Australia | Stockspot (2022)

We have reviewed and compared 640 of Australia’s largest managed funds across returns, fees and performance.

We have found the top and best performing managed funds in Australia over the last five years across the following categories:

  • What is the best performing Australian large shares managed fund?,
  • What is the best performing Australian small shares managed fund?
  • What is the best performing global large shares managed fund?.

We also provide our verdict on whether managed funds are worth investing in compared to alternatives like ETFs.

What is the best performing Australian large shares managed fund?

Total funds compared311
Index ETF return before fees9.06% p.a.
Index ETF fees0.10% p.a.
Index ETF net return8.96% p.a.
Average managed fund return before fees8.8% p.a.
Average managed funds fees1.32% p.a.
Average managed fund net return after fees7.48% p.a.
$100,000 invested in the index ETF 5 years ago$153,580
$100,000 invested in the average managed fund 5 years ago$143,429
Managed funds that beat the index ETF benchmark over 5 years80 funds (25.7%)
Managed funds that underperformed the index ETF benchmark over 5 years231 funds (74.3%)

Stockspot commentary

A simple index ETF outperformed active fund managers both before and after fees.

The average Australian large cap active manager almost equalled the index ETF returns before fees but fell well short after fees, underperforming by 1.48% p.a. over five years. 74% of managed funds underperformed the index ETF over five years, which is consistent with S&P research which shows 85% underperform the index over the long run (15 years).

Why? Active investing is a zero sum game. For every winner there has to be a loser and since 95% of trading happens between professionals you would expect the average active manager to achieve a return similar to the market return minus fees and other trading costs.

This is particularly true in highly competitive and professionalised markets like Australia and the U.S. where large cap shares are covered by hundreds of analysts and fund managers and there is very little ‘edge’ over each other or the market. This continues to hold true for Australian equities across different investment structures. We have found similar results in our research of LICs and actively managed super funds which both underperform equivalent index ETFs.

Active managers would need to dramatically reduce their fees for a higher % to outperform the index/benchmark. We believe this mathematical certainty is likely to drive a continued structural decline in active funds management.

Active fund managers can have periods of outperformance which are largely driven by their style (growth vs value investing). Over the last five years there have been large inflows into outperforming ‘growth’ funds in Australia like the Hyperion Australian Growth Companies Fund and Bennelong Australian Equities Fund. However, over the last six months, many of these funds have suffered large losses due to their heavy weighting to the technology and consumer sectors. For example, Hyperion -22.5% and Bennelong -17.5% over the six months to the end of April 2022.

Flows into managed funds generally peak around the same time as their relative performance, so on a money-weighted basis investors lose out long term by chasing styles.

A similar U.S. example of this is the ARKK Innovation Fund which attracted huge inflows around the peak of its performance in late 2000/early 2021 and has since fallen 75% to now be underperforming the S&P500 index.

Through May 23, 2022, ARK series of funds have collected around $515 million in fee revenue from their investors since 2014 in exchange for losing nearly $17 billion (~53%) of the money entrusted to them over that time.

Best Performing Managed Funds in Australia | Stockspot (1)

Australian large cap shares best performing managed funds over 5 years

Product Name1-Year Return3-Year Return (p.a.)5-Year Return (p.a.)ICR (fee %)
Chester High Conviction Fund20.919.715.80.95
Bennelong Australian Equities Fund-4.412.912.91.00
Macquarie Australian Shares Fund12.112.112.10.60
Alphinity Sustainable Share Fund8.312.012.00.95
Smallco Broadcap Fund5.59.011.61.20
Australian Ethical Australian Shares Fund (Wholesale)1.714.411.61.10
Alphinity Socially Responsible Share Fund – Class B8.111.811.60.90
Ausbil Australian Active Equity Fund13.413.711.30.90
Hyperion Australian Growth Companies Fund-10.712.711.30.95
First Sentier Wholesale Australian Share Fund-3.910.610.90.96

Australian large cap shares worst performing managed funds over 5 years

Product Name1-Year Return3-Year Return (p.a.)5-Year Return (p.a.)ICR (fee %)
Sandhurst Industrial Share Fund12.45.33.91.51
MLC Masterkey Unit Trust Income Builder15.17.44.21.49
Perpetual WF Investment Advantage Perpetual Industrial Share5.56.84.51.95
Investors Mutual Equity Income Fund17.15.04.50.99
Perpetual Industrial Share5.56.94.62.01
Investors Mutual All Industrials Share Fund13.15.94.60.99
Merlon Australian Equity Income Fund16.26.04.70.95
Allan Gray Australia Stable Fund6.74.84.70.26
MCP Australian Share Income Fund16.26.04.80.95
Investors Mutual Concentrated Australian Share Fund11.64.45.10.99

Stockspot verdict: We recommend the Vanguard Australian Shares Index ETF (VAS) for our Stockspot clients over any of the available active funds for the reasons above.

Product Name1-Year Return 3-Year (p.a.)5-Year (p.a.)ICR (fee %)
Vanguard Australian Shares Index ETF (ASX:VAS)10.29.79.00.1
  • 74% of active managers underperform on an after fee basis. If you included closed funds even more managed funds would have underperformed.
  • Money weighted returns in active funds are lower still due to the behavioural bias to attribute outperformance to skill rather than luck. This leads to flows moving into outperforming active funds just before a period of underperformance.

What is the best performing Australian small shares managed fund?

Total funds compared85
Index ETF return before fees12.13% p.a.
Index ETF fees0.40% p.a.
Index ETF net return11.73% p.a.
Average managed fund return before fees12.39% p.a.
Average managed funds fees1.43% p.a.
Average managed fund net return after fees10.96% p.a.
$100,000 invested in the index ETF 5 years ago$174,120
$100,000 invested in the average managed fund 5 years ago$168,202
Managed funds that beat the index ETF benchmark over 5 years31 funds (36.5%)
UManaged funds that underperformed the index ETF benchmark over 5 years54 funds (63.5%)

Stockspot commentary

Contrary to common belief, the majority of small cap fund managers underperform the small cap index on an after fee basis. Interestingly, small cap managers could have equalled the index return of 11.73% had their fees been smaller.

Small cap fund manager fees would have needed to be cut from 1.43% p.a. to 0.66% p.a. to equal the index return. This shows that active managers charge too much relative to the ‘alpha’ (edge over the market return) that they can add.

Like in Australian large caps, ‘value’ managers feature in the long term underperformers (but shorter term winners), while ‘growth’ managers feature in the longer term winners (but short term losers).

Perennial has one of the higher five year returns at 18.21% p.a. but has lost 21.92% of its value over the last six months. Pendal has one of the worst performers and one of the best performers.

Investors Mutual and NovaPort feature heavily in the worst performers over five years. NovaPort targets 5-10% above the index over three years but has actually underperformed the index by 20% over three years. Over 19 years however, the fund claims to have turned $10,000 into $100,000. This implies a return of 12.6% p.a. over 19 years compared to the small cap index return of 7.7% p.a.

All of the outperformance came prior to 2017. This shows how variable active manager returns can be and also that prior outperformance is not a good indicator for future outperformance. If anything, active manager returns tend to mean revert over time.

The absolute worst performing fund is the OnePath OA Investment Portfolio-Emerging Companies which has returned 1.72% p.a. over 5 years versus the index at 11.73%. It is the only fund to underperform by 10% p.a. or 50% in total.

Incredibly there is still $47m sitting in this fund which charges fees of 2.06% p.a. Despite this enormous underperformance over five years, this fund still advertises a time horizon that makes its performance look positive.

Australian small cap shares best performing managed funds over 5 years

Product Name1-Year Return3-Year Return (p.a.)5-Year Return (p.a.)ICR (fee %)
Ausbil MicroCap Fund19.121.221.31.2
Eley Griffiths Group Emerging Companies Fund10.618.820.81.25
SGH Emerging Companies Fund16.622.820.81.03
Perennial Value Microcap Opportunities Trust-14.710.918.21.2
Pendal MicroCap Opportunities Fund7.319.417.71.2
OC Micro-Cap Fund-9.917.117.61.2
Macquarie Small Companies Fund9.314.217.50.9
Macquarie Australian Emerging Companies Fund-0.815.317.42.67
Macquarie Australian Small Companies Fund9.214.017.00.99
Fairview Equity Partners Emerging Companies Fund4.713.015.11.2

Australian small cap shares worst performing managed funds over 5 years

Product Name1-Year Return3-Year Return (p.a.)5-Year Return (p.a.)ICR (fee %)
Investors Mutual Wholesale Future Leaders Fund6.15.05.30.99
NovaPort Smaller Companies Fund – Class B3.25.96.21.5
abrdn Australian Small Companies Fund-7.56.06.31.26
Investors Mutual Australian Smaller Companies Fund5.97.26.80.99
NovaPort Premier Smaller Companies Fund3.86.57.10.95
NovaPort Smaller Companies Fund3.96.77.30.9
Ironbark Karara Australian Small Companies Fund-2.45.27.51.2
Celeste Australian Small Companies Fund-5.49.57.91.1
BT Smaller Companies Fund (Retail)3.77.28.91.22
Pendal Smaller Companies Fund3.87.59.31.24

Stockspot verdict: We prefer the Vanguard MSCI Australian Small Companies Index ETF (VSO) for our Stockspot clients over any of the available active funds for the reasons above.

Product Name1-Year Return3-Year Return (p.a.)5-Year Return (p.a.)ICR (fee %)
Vanguard MSCI Australian Small Companies Index ETF (ASX:VSO)9.612.111.70.3

What is the best performing global large shares managed fund?

Total funds compared244
Index ETF return before fees14.69% p.a.
Index ETF fees0.40% p.a.
Index ETF net return14.19% p.a.
Average managed fund return before fees10.27% p.a.
Average managed funds fees1.19% p.a.
Average managed fund net return after fees9.08% p.a.
$100,000 invested in the index ETF 5 years ago$194,151
$100,000 invested in the average managed fund 5 years ago$154,427
Managed funds that beat the index ETF benchmark over 5 years6 funds (2.5%)
Managed funds that underperformed the index ETF benchmark over 5 years238 funds (97.5%)

Stockspot commentary

Global fund managers had the worst relative performance versus a simple index ETF over the last five years, underperforming by 5.61% p.a. each year for five years.

Only 6 of 244 active managers outperformed the index ETF. Assuming an initial investment of $100,000, you would have been $40,000 better off investing in the global index ETF compared to the average active manager over the last five years.

The best 2 funds have invested into high growth/tech and done well over five years but lost 28.85% and 15.95% over the last six months with the sell-off in global tech and consumer shares.

Pengana, Pendal, Epoch, Orbis, Magellan and Platinum are some of the more well known fund managers in the bottom performers list. Several have suffered falls of 20-30% over the last six months as U.S. tech and consumer discretionary shares have gone out of favour with rising interest rates. Average fees of 1.19% p.a. (plus sometimes performance fees) mean that these active funds need to outperform the index by 4% over every five years just to recover their fees, which most don’t achieve. We have written more detail on the impact of fees and why we avoid active funds here.

Global large cap shares best performing managed funds over 5 years

Product Name1-Year Return3-Year Return (p.a.)5-Year Return (p.a.)ICR (fee %)
Hyperion Global Growth Companies Fund (Managed Fund)-17.6110.4216.550.7
Loftus Peak Global Disruption Fund-10.2712.2516.032.55
Ironbark Royal London Concentrated Global Share Fund12.7115.0415.251.03
Nikko AM Global Share Fund-2.4111.3514.060.99
Alphinity Global Equity Fund7.512.413.731
Franklin Global Growth Fund-7.7712.0213.550.9
T.Rowe Price Wholesale Plus Global Equity-139.6713.461
Apostle Dundas Global Equity Fund – Class C3.0311.5113.150.9
Capital Group New Perspective Fund (AU)-3.511.4130.95
T. Rowe Price Global Equity Fund-13.579.0512.981.11

Global large cap shares worst performing managed funds over 5 years

Product Name1-Year Return3-Year Return (p.a.)5-Year Return (p.a.)ICR (fee %)
PAN-Tribal Global Equity Fund-23.781.295.281.2
Epoch Global Equity Shareholder Yield (Hedged) Fund6.345.365.331.3
Platinum Global Fund (Long Only)-11.242.175.611.35
Pengana Axiom International Ethical Fund (Hedged)-13.194.195.851.35
Generation Life Investment Bond Magellan Global Fund-3.862.35.862.15
Magellan High Conviction Fund – Class A-15.190.466.21.5
Pendal Concentrated Global Share Fund Hedged-1.927.266.540.9
Polaris Global Equity Fund-1.024.996.631.28
Epoch Global Equity Shareholder Yield (Unhedged) Fund11.965.796.641.25
Pengana Axiom International Ethical Fund-7.126.946.651.35

Stockspot verdict: We favour the Global 100 ETF (ASX:100) over any of the available active funds for the reasons above.

Product Name1-Year Return3-Year Return (p.a.)5-Year Return (p.a.)ICR (fee %)
iShares Global 100 ETF (ASX:IOO)11.213.614.20.4

Someone investing $100,000 into global shares five years ago would be $40,000 better off investing in the IOO ETF compared to the average global active managed fund.

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