A focus on the banks helped drive funds' performance. Photo: Bloomberg
Australian fund managers outperformed the market in 2013, marking their best return in seven years.
The gains came as investors dumped mining shares in favour of the top four banks.
For the 12 months to December, the median Australian share manager posted a 23.2 per cent return, outstripping the S&P/ASX 300 Index by 3.5 percentage points, according to figures compiled by Mercer.
This compares with fund managers outperforming the market on average by 1.3 percentage points in the past five years.
Mercer principal David Carruthers said it was the best result since 2006, when the median return for Australian share managers was 24 per cent.
He said fund managers had generally invested in cyclical stocks, which outperformed defensive sectors, and avoided smaller companies and typical mining shares.
‘‘Overweighting large caps will have aided managers’ performance with the s&P/ASX 50 (+22.1 per cent) outperforming the S&P/ASX Small Ordinaries (-08 per cent) and the S&P/ASX Mid 50 (+16.8 per cent) over the year,’’ Mr Carruthers said.
The big four banks were the best performers, with the financial sector rising 30.3 per cent.
This compared to materials, which was the only sector to finish in negative territory, falling 2 per cent.
Posting the biggest slides were gold miner Newcrest – which fell 64.2 per cent after it was embroiled in a market disclosure scandal and suffered under slumping gold prices – and global mining services Boart Longyear, which plunged 78.1 per cent following several profit downgrades as resources stop spending and cut back on new projects.
In contrast, the consumer discretionary sector delivered the best return at 40.7 per cent.
The top performing share manager was the Lazard Select Australian Equity Fund, which recorded a 36.6 per cent return. Bennelong Australian Equity Partners’ concentrated fund was next, at 34.9 per cent.
Bennelong’s chief investment officer Mark East said while macro factors were considered, the individual performance and management of the company guided investment decisions.
He singled out health stocks, particularly global hospital group Ramsay Health Care, as a strong contributor.
‘‘Maybe it’s not the sexiest stock around but it really has solid management in a good industry that’s growing and they’ve executed really well,’’ Mr East.
Travel agent Flight Centre was another good performer, Mr East said.
‘‘People have been calling the death of the bricks and mortar travel agent for a long time but Flight Centre keeps executing really well, it has a good management team... they are blending that bricks and mortar offering with online.
‘‘That stock performed really well over the year and has basically had rolling upgrades for a number of years now, assisted by growing spend on travel and outbound travel and good execution by management.’’
Mr East said the year ahead would be ‘‘all about delivering earnings’’.
‘‘You have seen a lot of stocks re-rate in terms of their price-earnings, so multiples have risen and a lot of growth in share prices from here would have to come from earnings.’’
Overseas shares delivered a mammoth 48.4 per cent return, albeit in line with the benchmark index, which was 48 per cent.
A slight overperformance has been observed for the past three years, with overseas shares on average recording a 17.2 per cent return compared with the benchmark’s 16.9 per cent.