|
Hedge Clippings | Friday, 16 April 2021
Last week's Hedge Clippings began exploring the world of Cryptoland, which thanks to Coinbase's NASDAQ IPO this week has become front page headlines. Coinbase is valued at a mere $111 billion, more than that of Westpac ($93 billion) who were an early investor, and possibly in due course will become a crypto adopter in spite of CEO Bill King's opinion that Bitcoin is not a great store of value. Whoever said Australian banks are slow and conservative?
Some commentators have suggested crypto is a fad (that won't last) and a bubble. We're not going to try to argue about the valuation which may well be excessive - time will tell, but unlike many other early tech IPO's, Coinbase is profitable. But there's no doubt crypto as a currency will last, and evolve, AND in due course - if not already - become mainstream. With literally thousands of different coins other than Bitcoin, the infrastructure - the "picks and shovels" - will be essential to the everyday coin holder. We're reminded of those know-alls (who should have known better) who, when the dotcom bubble burst in early 2000, predicted the internet was a passing fad, and we'd all better go back to "bricks and mortar".
Fast forward 20 years and try to imagine life without the internet? With the acceleration of technological change (in part assisted by the internet) and the adoption by banks and financial institutions, it will take a fraction of 20 years for crypto to become part of everyday life - as for an increasing number of people, it already is.
For us, change is to be embraced, even if the learning curve is steep.
And now back to the past and present - or at least the economy, and funds' performance over the past 12 months.
Australia's economic performance over the past 12 months has been extraordinary - even the most optimistic treasurer wouldn't have dreamed of a 5.5% unemployment rate and a record participation rate 12 months ago - and the market has responded with the ASX200 up 37.5% and the S&P500 up 56%.
Most equity fund managers (and if it comes to that, most investors) will be happy to see March 2020 returns wiped from their 12 month performance history, and as a result all but a handful of managers recorded a positive 12 month return. Some, however, have excelled.
A search of the top 20 performing funds across all equity strategies, and all geographic mandates shows returns of 86.94% (Forager International, Global Equity Long, Small Cap) through to 188% (Frazis Fund, Global Equity Long/short, All Cap). In spite of the top performing fund being long/short, we'd imagine the main driver of returns has been on the long side.
Of the top 20 only 5 have the ability to short, and only one is designated as investing in large cap companies, although a further 6 are listed as "all cap". This clearly shows where the action has been. Eleven have an Australia or Australia/NZ investment mandate, and only five are purely global - however that might be explained by the skew of the underlying AFM database.
There is always a caveat that one-year performances, whilst welcome and attractive, aren't the way to make an investment decision.
Looking at the Top 20 fund's three and five year results provides the following insight:
Four of the Top 20 don't have a three-year track record, making longer term analysis difficult, and a further four don't have five years. The average three-year return of the remainder have an average return of 13.4% per annum, with a range of -11% to 27.56%, whilst for five years the average return is 15.3% with a range of -2.96% through to 23.96
At the other end of the scale - the bottom 20 - only four failed to make a positive return, and those were dominated by long/short managers, as were the majority of the balance of the underperformers.
It's wise (or rather, essential) to remember that all (or nearly all) funds have their day, and that investing in a portfolio of funds across strategies and asset classes is the best approach to risk management.
News & Insights
Video interview with Monik Kotecha from Insync Funds Management
One Year On - What Did We Learn? by Marcus Today
|
