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The top-performing Australian equities funds for 2021
Active managers outperform, with Airlie and Seneca on top
Markets

2022 was a pivotal year for managed discretionary accounts (MDAs). Funds under management surpassed the magical $100 billion mark for the first time, as the uptake among financial advisers was boosted by Covid-19.

According to the Institute of Managed Account Professionals (IMAP), estimates are for funds under management to cruise past the $200 billion mark over the next few years, representing an accumulative average growth rate of over 20%.

It’s no secret that financial advisers who employed managed accounts during the pandemic were able to provide their clients a much better service by building closer relationships to gain a better understanding of their clients’ needs, wants and financial position. There is also an element of psychology involved with MDAs, that allows advisers to hold their client’s hand and reassure them that “things will be ok”.

It’s this value-adds that differentiate the great from the norm: advisers that were able to change the way they interacted with clients by delivering portfolio management remotely and regularly, communicating via Zoom. According to Money Management, “reassuring clients plays a greater part in the work of financial advisers than offering actual financial advice, according to financial advisers, with many valuing the advice more in turbulent times.”

Here we are, and things have only gotten better. By and large, managed accounts have proven resilient and effective during an economic downturn such as the pandemic that just passed. When market volatility rose, the need for financial advice went through the roof as concerned clients wanted to know what to do.

Investment Trends and State Street Global Advisors (SSGA) say 70% of planners currently using or intending to use managed accounts, compared to 44% in 2012. With the benefits of using managed accounts becoming increasingly apparent to both planners and advisers, we are likely to see this sector continue to grow past the $200 billion mark.

As such, The Inside Network publishes a quarterly update on managed accounts, with the most up-to-date data that is publicly available. The team analysed the December 2021 Quarter’s managed discretionary account performance.

Innately, the data is limited to the MDAs placed within that platform, and so some are not listed. For that reason, we encourage boutique fund managers to email through to us performance data on a monthly basis, so our team can cover your vehicle performance.

Here are the top 10 best-performing funds under the Australian Share option for 2021:

Magellan-owned Airlie’s Australian share fund topped the list for the year with a 28.76% return, smashing the benchmark S&P/ASX 200 Index’s return of 17.23%. Portfolio managers Matt Williams and Emma Fisher did a remarkable job at stock-picking. One of their star picks was Mineral Resources (MIN), which rallied hard on the back of the lithium and iron ore boom.

In second place was Paradice Investment Management’s Australia Equities fund, which returned a cool 26.06%. The team managed to leverage off the materials and financial recovery post-Covid-19.

Following on was boutique wealth management firm Seneca Financial Solutions’s Australian Shares SMA, which returned 25.66 per cent.

Seneca managing director Luke Laretive attributes the performance to picking quality companies at the right time. He says “returns were generated from key thematics such as batteries and the lithium boom. We held stocks such as Pilbara (ASX:PLS), which rallied +164%. We held Mineral Resources (ASX:MIN), but also picked up really strong returns in the banks and other financials such as Computershare (ASX:CPU), and saw decent returns from individual stock picks such as Boral (ASX:BLD), James Hardie (ASX:JHX) and Collins Foods (ASX:CKF). These stocks have returned over 40% and have done well for us. We’re still fairly bullish on Xero (ASX:XRO). It’s a good business that we think will recover and outperform this year.”

Also worthy of a mention is boutique firm, Ethical Advisers Funds Management who specialise in ethical, responsible, ESG investing. Their Mid-Cap Portfolio (SMA) had a remarkable year posting a 27.98% return.

What was remarkable is that the managed accounts in that list performed well and were able to beat the benchmark S&P/ASX 200 Index return. This is despite the headlines suggesting that passive “always” wins over active funds.

And so, the message is clear – not only are advisers and clients seeing managed account services as their preferred service model, but the high returns generated in 2021 have shown this to be an attractive investment structure.




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