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Top performing funds receive ratings upgrades

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It was another busy week for Australia’s rating agencies, both on a corporate and operational level. On the one hand, Australia Ratings Group was acquired by Foresight Analytics, something we covered here. More topical though, was the upgrade of a number of popular, high-performing funds in 2020 and 2021.

  • The Firetrail Australian Small Companies Fund received an initial rating of ‘Recommended’ by Zenith Investment Partners shortly after reporting a return of 62.5% for the 12 months to 28 February. Described as a “style-neutral” high-conviction exposure to Australian small caps, the strategy isn’t afraid to invest into resources or IPOs.

    In a recent presentation, Eleanor Swanson, a founding partner at Firetrail, likened its approach to tennis, suggesting the lack of a style bias means the firm is prepared for all market conditions, which is a good way to look at the growing cohort of ‘value’ or ‘growth’ small-cap names. The Firetrail team has around $5.5 billion in assets under management, with the smaller companies fund the latest product offering to leverage-off the firm’s extensive capabilities.

    According to reports, the managers are positive on the prospects of soon-to-be-listed marketplace group Airtasker, highlighting it as one of the most exciting growth opportunities in some time. Firetrail flags the fact that the range of services that can be offered is near-infinite and has now grown to the largest employer with a response time of just two minutes. With the Australian industry just $52 billion in size, management is focused on the $643 billion global opportunity.

    Matthew Fist is co-head of the fund, which includes 30 to 40 stock holdings, with an active share exceeding 90%.

    In the larger-cap space, the award-winning Franklin Global Growth Fund has been upgraded by Lonsec, gaining a ‘Recommended’ rating given the strong performances in 2020. The news comes as the group was named a finalist in the Morningstar awards for Fund Manager of the Year for the second straight year.

    We covered this unique, high-performing fund in greater detail late last year, available here, after the experienced team managed to deliver market-leading returns throughout the pandemic. What was all the more surprising was the fact that this was achieved without relying on the popular FAANG stocks or Microsoft etc. 

    The group focuses on understanding “secular trends” and ensuring the diversification of revenue across its 35–40 holdings, rather than simply in name or sector. According to the report “Lonsec has strong regard for the manager’s growth investment philosophy and intensive research process.”

    The Franklin Global Growth Fund has consistently outperformed its benchmark, delivering a return of 30.6% for the 2020 calendar year, 24.8% ahead. Over the five years to February 2021, returns have been 18.9% a year, outperforming by 6.6% a year. And they say active managers can’t outperform the market consistently!

    Information technology, industrials and consumer discretionary were the biggest contributors to the outperformance in 2020. While the fund’s growth style provided tailwinds over the period, stock selection provided the bulk of the positive contribution, reflecting the depth of research and differentiated investment approach.


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