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SQM Research Ratings Update
July 2020
Our Ratings & Fund Data Service covers Sector Reviews, Fund research & Quantitative analysis for about 9000 funds. For more information contact us today! Get the right information & insightful advice first from SQM Research.  To subscribe to our Ratings and Funds Data Service, click HERE.

 
How did Aussie Equity Managers do in the COVID-19 Crisis (so far)?
Rob da Silva – Head of Research

We take a quick look at Australian Equity Managers (Large-Cap) and how they have performed through the lightning-fast market meltdown. Specifically, the five months of Jan-2020 to May-2020 inclusive.
 
The analysis covers a total of 241 products in this space encompassing over $70 billion of Funds Under Management (FUM). The information is derived from SQM’s Funds Explorer Tool which in turn is powered by Morningstar data.
 

Style:
 
Sector No. of Funds FUM $mill
Equity Australia Large Blend 162 $49,698
Equity Australia Large Growth 30 $7,450
Equity Australia Large Value 49 $13,135
Grand Total 241 $70,283

Fund Size:
 
Size $mill No. of Funds FUM $mill
0 to 200 150 $7,986
200 to 500 30 $9,033
500 to 1000 24 $16,849
over 1000 17 $36,416
 
Management Fee:
 
Management Fee No. of Funds Average Fee
< .0.50 49 0.30
0.50 to 0.70 29 0.62
0.70 to 0.90 68 0.82
0.90 to 1.10 56 0.99
> 1.10 36 1.50
Vanguard Australian Shares Index   0.18
 
Alpha – “It’s Alive!!!”
 
The COVID-19 crisis has been an unprecedented and testing time in economies and financial markets.
 
The two graphs below show the tumultuous roller-coaster ride the Australian stock market has taken over the first half of 2020.





Alpha is alive and well and living amongst Australian Equity Managers (and elsewhere).
 
The tables and charts below show that around 53% of funds have outperformed their benchmarks  over the first 5 months of 2020.
 
The funds have been compared, where possible, to their own stated performance benchmarks.
The majority use either the ASX 200 or the ASX300 Accumulation Indexes.
 

Performance of AEQ Manager Cohort over 5 months to May 2020
 
  +ve Alpha -ve Alpha Total Funds
No. 123 108 231
Avg Size 3.29 -3.27  
% 53.2% 46.8%  

 

The chart below suggests manager skill (for this cohort) is more like a normal distribution. Many more managers have outperformed than suggested by popular headlines such as “95% of managers under perform”.



Finally (and this will surprise no-one) the table below shows that Growth out-performed Value and style-neutral (i.e. blend) tended to come out in between. Growth (and momentum) have dominated over Value for some time now and it appears the current crisis has not changed that (yet!).
 
Sector +ve Alpha -ve Alpha
Equity Australia Large Blend 3.07 -3.49
Equity Australia Large Growth 4.82 -2.31
Equity Australia Large Value 2.70 -3.07
Grand Total 3.29 -3.27


 
Recently Published Reports


 
SQM Research's Top 5 SQM Rated Funds* - 30 June 2020

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* Any Funds in this table that have international investments will have different hedging patterns, from hedged to unhedged or variable hedging. This may have an impact on fund returns. Please refer to the Fund's product disclosure statement for details.

SQM Research's Top 50 ETFs - 30 June 2020
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SQM Research's Market Benchmarks - 30 June 2020

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Ratings Table
(Please note: In order to view individual ratings reports you must be subscribed to SQM Research Ratings research. To subscribe, click HERE)

For further information: 
Rob da Silva - Head of Research, SQM Research
Tel: (02) 9220 4606   Email:
 rob@sqmresearch.com.au

Louis Christopher - Managing Director, SQM Research
Tel: (02) 9220 4666  Email:
louis@sqmresearch.com.au

 
About SQM Research 
SQM Research is an independent property advisory, ratings and forecasting research 
house which specialises in providing accurate property related advice, research and data to financial institutions, property developers and real estate investors. For more information please visit www.sqmresearch.com.au
 
Research Methodology
In general, the assessment approach adopted by SQM Research incorporates a combination of qualitative and quantitative research techniques to assess property investment products. Information generated is passed through the SQM Research assessment model at the completion of the assessment process. The assessment model generates a product score, which correlates to a specific star rating (out of a maximum of five stars). Each star rating covers a scoring range, allowing products to be ranked within quarter star increments.
 
Following are descriptions for each of the star ratings, which have been developed as a guide for dealer group research teams and investment committees:
4.5 stars and above - Outstanding. Highly suitable for inclusion on APLs.
4.25 stars - Superior. Suitable for inclusion on most APLs.
4 stars - Superior. Suitable for inclusion on most APLs.
3.75 stars - Favourable. Consider for APL inclusion.
3.5 stars - Acceptable. Consider for APL inclusion.
3.25 stars - Caution required. Not suitable for APLs.
3 stars - Strong caution required. Not suitable for APLs.
Below 3 stars – Avoid or redeem. Not suitable for APLs.
Hold - Rating is suspended until SQM Research receives further information. A rating is typically put on hold for a period of two days to four weeks.
Withdrawn - Rating no longer applies. Significant issues have arisen since the last report date. Investors should consider avoiding or redeeming units in the fund..
 * The definitions above are not all encompassing and not all individual items mentioned will necessarily be relevant to the rated Fund. Users should read the current rating report for a comprehensive assessment.

DISCLAIMER
The rating contained in this document is issued by SQM Research Pty Ltd ABN 93 122 592 036. SQM Research is an investment research firm that undertakes research on investment products exclusively for its wholesale clients, utilising a proprietary review and star rating system. The SQM Research star rating system is of a general nature and does not take into account the particular circumstances or needs of any specific person. The rating may be subject to change at any time. Only licensed financial advisers may use the SQM Research star rating system in determining whether an investment is appropriate to a person’s particular circumstances or needs. You should read the product disclosure statement and consult a licensed financial adviser before making an investment decision in relation to this investment product. SQM Research receives a fee from the Fund Manager for the research and rating of the managed investment scheme.
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