While much ado is made of the science that goes into fund manager research, real assessment puts comparable weight on the art as well according to investment leaders.
While financials and materials dominated trades leading into 2024, the popularity of other sectors like healthcare and information technology followed generational, and even demographic, lines.
Lazard, PM Capital top the tables for Oz equities
And there goes the 2022 financial year. It flew by in the blink of an eye. A pandemic, a few supply-chain disruptions, a war in Europe, rising energy prices, climate change and soaring inflation. What more could you ask for?
These are just some of the events that impacted global markets throughout the year. 2022 has been highlighted as the year in which ‘value’ investors closed the gap on their ‘growth’ counterparts after more than a decade, and that may well be the case. But for the top-performing Australian equity funds, there was one main theme in common: an overweight to commodities and energy.
| Fund Manager | Fund Name | 1 year* | |
| 1 | Lazard Asset Management | Select Australian Equity | 18.00% |
| 2 | APSEC Atlantic Pacific Australian Equity | Atlantic Pacific Australian Equity | 17.94% |
| 3 | PM Capital | Australian Companies | 10.62% |
| 4 | Alliance Bernstein | Concentrated Australian Equities | 8.71% |
| 5 | Allan Gray | Australia Equity | 6.45% |
| 6 | Maple-Brown Abbott | Australian Equity Trust | 5.79% |
| 7 | Allan Gray Australia | Australia Equity | 5.67% |
| 8 | Merlon Concentrated Australian Share I TR in AU | Concentrated Australian Share | 4.94% |
| 9 | Chester High Conviction TR in AU | High Conviction | 4.84% |
| 10 | PM Capital | Australia Companies |
In top place was Lazard Asset Management’s Select Australian Equity Fund, which delivered a cool 18.00 per cent for the year, and with good reason. Dr Philipp Hofflin of Lazard Asset Management has been an avid supporter of the unloved energy sector, taking up positions in the fund when prices were low some 18 months ago.
Primarily, the fund is a highly concentrated portfolio that holds between 12 and 30 of Lazard’s “best ideas,” combined with a value overlay to ensure companies selected are trading below their intrinsic value. But that’s not why Lazard took out the top spot. It all boils down to two of its high-conviction holdings: Whitehaven Coal (ASX:WHC) and Woodside Petroleum (ASX:WPL).
Holdings in Whitehaven have gone up a whopping fivefold, while the fund’s Woodside Petroleum holding is not far from doubling in value. Woodside accounts for almost 10 per cent and Whitehaven 6.2 per cent of the portfolio. Star stock-picking by Hofflin and his team has definitely paid off.
Here are the fund’s top 5 stocks:
| Holdings | Lazard (%) | Sector |
| QBE Insurance | 10.24% | Financials |
| Woodside Energy | 9.64% | Energy |
| AMP | 6.67% | Financials |
| Whitehaven Coal | 6.19% | Energy |
| Rio Tinto | 6.03% | Materials |
With the rise in oil and commodity prices as a direct result of sanctions placed on Russia, most of the top stocks in Lazard’s portfolio have outperformed, adding to the stellar performance.
The second-best performing fund was the APSEC Atlantic Pacific Equity Fund (APEAF) which returned 17.94 per cent. The fund has consistently produced outstanding results by focusing on risk management. This has also helped it smooth-out volatility during market downturns so that it can generate strong, stable investment returns. According to Money Management, APAEF was the top-performing Australian equity fund in 2020. This fund was also heavy on the energy side, recording a near 7-8 per cent sector overweight to energy stocks.
In third place was PM Capital’s Australian equities fund, which returned a healthy 10.62 per cent with a clear overweighting to commodities – energy, industrial metals and alternative investment managers. Like Lazard, the portfolios contained Woodside Petroleum (ASX:WPL) together with Stanmore Resources (ASX: SMR), Beach Energy (ASX: BPT) and Apollo Global Management (NYSE: APO), all of which were key contributors to performance. Short positions in REA Group (ASX: REA) and Seek (ASX: SEK) also contributed positively to performance.
| Top 10 stocks | Sector |
| Apollo Global Management | Diversified Financials |
| ANZ | Banks |
| BHP | Materials |
| Coronado Global Resource | Energy |
| Crown | Consumer Services |
| ING Group | Banks |
| NAB | Banks |
| Stanmore Resources | Energy |
| Westpac | Banks |
| Woodside Energy | Energy |
Investors who bought into any of the Australian equities funds listed in the top ten will have done remarkably well compared to the S&P/ASX 200 Accumulation Index, which returned only 4.8 per cent. It doesn’t take long before the recurring theme stands out; the question however is for how long it lasts, particularly given that the oil sector has already entered a correction at the time of writing.
Funds that outperformed in the Australian equities space were ones that were heavily weighted towards energy and commodity stocks. It wasn’t ‘value’ stocks that did well, but rather ones exposed to a rally in commodities that shifted from metals to energy resources, such as crude oil, liquefied natural gas (LNG) and coal. Those funds exposed to stocks such as Woodside Petroleum and Whitehaven Coal saw strong performances at the year’s end.
