We have reviewed and compared 806 of Australia’s largest managed funds across returns, fees and performance to the end of September 2023. We have found the top and best performing managed funds in Australia over the last five years across the following categories:
- What is the best performing Australian large shares managed fund?,
- What is the best performing Australian small shares managed fund?
- What is the best performing global large shares managed fund?.
We also provide our verdict on whether managed funds are worth investing in compared to alternatives like ETFs.
What is the best performing Australian large shares managed fund?
Here we compare the average managed fund versus the simple low-cost ETF we recommend to clients:
| Total funds compared | 372 |
| Index ETF return before fees (ASX:VAS) | 8.07% p.a. |
| Index ETF fees (ASX:VAS) | 0.10% p.a. |
| Index ETF net return (ASX:VAS) | 7.97% p.a. |
| Average managed fund return before fees | 6.62% p.a. |
| Average managed funds fees | 1.04% p.a. |
| Average managed fund net return after fees | 5.58% p.a. |
| $100,000 invested in the index ETF 5 years ago | $146,728 |
| $100,000 invested in the average managed fund 5 years ago | $131,192 |
| Managed funds that beat the index ETF benchmark over 5 years | 20 funds (5.4%) |
| Managed funds that underperformed the index ETF benchmark over 5 years | 352 funds (94.6%) |
Stockspot commentary
A simple index ETF significantly outperformed active fund managers both before and after fees.
The average Australian large cap active manager had a forgettable last 5 years, with around 95% underperforming an equivalent ETF after-fees. There is $105 billion invested into the 372 active funds we analysed. Given the under performance of 2.39% p.a. over 5 years this means that investors would have been better off by $11.8 billion had they invested into a low cost ETF instead. This is consistent with S&P research which shows that 80% to 95% of active funds underperform the index over the long run.
Why? Active investing is a zero sum game. For every winner there has to be a loser and since 95% of trading happens between professionals you would expect the average active manager to underperform the market return by the amount of their fees and other trading costs.
This is particularly true in highly competitive and professionalised markets like Australia and the U.S. where large cap and small cap shares are covered by hundreds of analysts and fund managers and there is very little ‘edge’ over each other or the market. This continues to hold true for Australian equities across different investment structures. We have found similar results in our research of LICs and actively managed super funds which both underperform equivalent index ETFs.
In order for a larger proportion of active managers to outperform the index or benchmark, they would need to significantly slash their fees, ideally to levels below 0.5% per annum. This undeniable mathematical reality is likely to contribute to an ongoing structural decline in the active funds management industry in Australia.
It’s worth noting that investment flows into managed funds tend to reach their peak at times when their relative performance is strong. However, when viewed from a money-weighted perspective, investors often experience long-term losses by chasing investment styles.
Australian large cap shares best performing managed funds over 5 years
| Product Name | 1-Year Return | 3-Year Return (p.a.) | 5-Year Return (p.a.) | ICR (fee %) |
| Glenmore Australian Equities | 5.91 | 17.42 | 13.83 | 1.20 |
| PM Capital Australian Companies | 11.37 | 18.31 | 12.79 | 1.09 |
| Australian Eagle Trust | 7.54 | 12.88 | 12.59 | 1.23 |
| Chester High Conviction | 8.9 | 14.71 | 9.76 | 0.95 |
| Sterling Units | 14.41 | 9.02 | 9.58 | 0.85 |
| Tribeca Alpha Plus Class C | 14.1 | 12.82 | 9.46 | 0.6 |
| Northcape Capital Core Australian Shares | 13.63 | 10.82 | 9.34 | 0.8 |
| Lazard Defensive Australian Equity | 12.44 | 19.16 | 9.29 | 0.75 |
| Airlie Australian Share | 15.12 | 13.64 | 9.22 | 0.78 |
| Tribeca Alpha Plus Class A | 13.76 | 12.09 | 8.88 | 0.97 |
Australian large cap shares worst performing managed funds over 5 years
| Product Name | 1-Year Return | 3-Year Return (p.a.) | 5-Year Return (p.a.) | ICR (fee %) |
| BlackRock Australian Share | 4.13 | -4.77 | -3.034 | 1.00 |
| BlackRock Australian Share Plus | 4.13 | -4.65 | -2.78 | 1.00 |
| BlackRock Equity | 4.12 | -4.66 | -2.77 | 1.00 |
| BlackRock High Conviction Australian Eq | 4.31 | -4.37 | -2.44 | 0.65 |
| Martin Currie Sust Eq M | 9.88 | 11.81 | 1.14 | 0.51 |
| OnePath OA IP-Nikko AM Aust Shares NE | 7.25 | 12.19 | 1.77 | 2.29 |
| ANZ OA IP-Nikko AM Aust SharesNE | 7.26 | 12.19 | 1.78 | 2.29 |
| CFS FC Inv-State Street Aus Equity | 0.94 | 1.67 | 1.78 | 1.04 |
| CFS FC Inv-Pendal Sust Aust Share | 10.4 | 7.24 | 1.88 | 1.04 |
| CFS FC-State Street W Aus Equity | 0.98 | 1.7 | 2.09 | 1.01 |
Stockspot verdict: We recommend the Vanguard Australian Shares Index ETF (VAS) for our Stockspot clients over any of the available active funds for the reasons above. It has outperformed 94.6% of active managers on an after fee basis.
| Product Name | 1-Year Return | 3-Year (p.a.) | 5-Year (p.a.) | ICR (fee %) |
| Vanguard Australian Shares Index ETF (ASX:VAS) | 14.82 | 12.14 | 7.97 | 0.1 |
- On an after-fee basis, a striking 94.6% of active managers fall short of market benchmarks. If terminated funds were factored in, even more managed funds would exhibit underperformance.
- Furthermore, money-weighted returns within active funds remain even lower, primarily because of the common behavioral tendency to attribute outperformance to skill rather than chance. This often results in capital flowing into active funds that have recently outperformed, just before a period of underperformance unfolds.
What is the best performing Australian small shares managed fund?
Here we compare the average managed fund versus the simple low-cost ETF we recommend to clients:
| Total funds compared | 147 |
| Index ETF return before fees (ASX:VSO) | 6.46% p.a. |
| Index ETF fees (ASX:VSO) | 0.30% p.a. |
| Index ETF net return (ASX:VSO) | 6.16% p.a. |
| Average managed fund return before fees | 5.76% p.a. |
| Average managed funds fees | 1.24% p.a. |
| Average managed fund net return after fees | 4.52% p.a. |
| $100,000 invested in the index ETF 5 years ago | $134,835 |
| $100,000 invested in the average managed fund 5 years ago | $124,737 |
| Managed funds that beat the index ETF benchmark over 5 years | 39 funds (26.5%) |
| UManaged funds that underperformed the index ETF benchmark over 5 years | 108 funds (73.5%) |
Stockspot commentary
Contrary to common belief, the majority of small cap fund managers underperform the small cap index both on a pre-fee and after-fee basis.
As one might anticipate with random chance, a few select small-cap funds have managed to outperform the index. Nevertheless, the majority of actively managed funds have underperformed when compared to the straightforward approach of investing in the Vanguard MSCI Australian Small Companies Index ETF (VSO), which incurs an annual fee of 0.3%. This is the small-cap fund we recommend to clients.
It’s noteworthy that the top 10 active funds over the past five years are entirely different from the top 10 funds of the previous year, suggesting that consistently strong performance is a rare occurrence.
Australian small cap shares best performing managed funds over 5 years
| Product Name | 1-Year Return | 3-Year Return (p.a.) | 5-Year Return (p.a.) | ICR (fee %) |
| Anacacia Wattle Fund | 13.62 | 10.39 | 15.84 | 1.50 |
| Regal Australian Small Companies Fund | 19.39 | 9.87 | 15.12 | 0.18 |
| Bennelong Emerging Companies Fund | 19.4 | 9.03 | 13.15 | 1.20 |
| Ophir Opportunities | 17.36 | 9.43 | 12.13 | 1.23 |
| Spheria Australian Microcap | 12.65 | 21.15 | 11.27 | 1.35 |
| Australian Ethical Emerging Companies WS | 8.56 | 2.9 | 10.64 | 1.20 |
| DNR Capital Australian Emerging Coms | 2.18 | 12.85 | 10.5 | 1.15 |
| Australian Ethical Emerging Companies | 8.18 | 2.48 | 10.13 | 1.69 |
| Microequities Pure Microcap Value | 33.24 | 17.18 | 10.09 | 1.80 |
| Prime Value Emerging Opportunities Fund | 12.88 | 8.16 | 9.78 | 1.25 |
Australian small cap shares worst performing managed funds over 5 years
| Product Name | 1-Year Return | 3-Year Return (p.a.) | 5-Year Return (p.a.) | ICR (fee %) |
| Equitable Investors Dragonfly | -17.91 | -10.15 | -11.69 | 1.50 |
| Cyan C3G | -21.82 | -14.24 | -8.43 | 1.50 |
| CFS FC Inv-FSI Future Leaders | 5.41 | -2.88 | -3.89 | 1.34 |
| CFS Future Leaders | 5.44 | -2.89 | -3.86 | 1.32 |
| FSI Wholesale Future Leaders | 5.49 | -2.85 | -3.62 | 1.31 |
| Saville Capital Emerging Companies | -19.64 | -25.67 | -1.25 | 1.25 |
| Perennial Value Microcap Opportunities | -4.01 | -11.5 | -1.24 | 1.20 |
| Perennial Value Smaller Companies Trust | -7.18 | -3.04 | -0.72 | 1.20 |
| Wentworth Williamson | 3.93 | 1.14 | -0.61 | 1.25 |
| OnePath OA IP-OP Emerging Companies NE | 8.11 | -1.73 | -0.19 | 2.09 |
Stockspot verdict: We prefer the Vanguard MSCI Australian Small Companies Index ETF (VSO) for our Stockspot clients over any of the available active funds. Why gamble on active funds for small-cap shares when nearly three quarters do worse than a simple index ETF?
| Product Name | 1-Year Return | 3-Year Return (p.a.) | 5-Year Return (p.a.) | ICR (fee %) |
| Vanguard MSCI Australian Small Companies Index ETF (ASX:VSO) | 8.46 | 7.71 | 6.16 | 0.30 |
What is the best performing global large shares managed fund?
Here we compare the average managed fund versus the simple low-cost ETF we recommend to clients:
| Total funds compared | 291 |
| Index ETF return before fees (ASX:IOO) | 13.04% p.a. |
| Index ETF fees (ASX:IOO) | 0.40% p.a. |
| Index ETF net return (ASX:IOO) | 12.64% p.a. |
| Average managed fund return before fees | 8.66% p.a. |
| Average managed funds fees | 1.15% p.a. |
| Average managed fund net return after fees | 7.51% p.a. |
| $100,000 invested in the index ETF 5 years ago | $181,327 |
| $100,000 invested in the average managed fund 5 years ago | $143,629 |
| Managed funds that beat the index ETF benchmark over 5 years | 10 funds (3.4%) |
| Managed funds that underperformed the index ETF benchmark over 5 years | 281 funds (96.6%) |
Stockspot commentary
Over the past five years, global fund managers have shown the poorest relative performance when compared to a straightforward index ETF, with an annual underperformance of 3.98% p.a..
Out of a total of 291 active managers, only 10 managed to outperform the index ETF over 5 years. Assuming an initial investment of $100,000, choosing the global index ETF would have resulted in a $38,000 advantage over the average active manager’s performance over the same five-year period.
Notably, some well-known fund managers such as Magellan, Platinum, and ARK find themselves among the underperformers. With average fees amounting to 1.78% per annum, these lagging active funds would need to consistently outperform the index by 9% over every five years just to offset their fees—an achievement that most of them fail to accomplish.
We have written more detail on the impact of fees and why we avoid active such as Wilson Asset Management (WAM), Platinum and Magellan here.
Global large cap shares best performing managed funds over 5 years
| Product Name | 1-Year Return | 3-Year Return (p.a.) | 5-Year Return (p.a.) | ICR (fee %) |
| Acadian Global Equity Long Short-Class A | 41.46 | 31.39 | 16.09 | 0.91 |
| Acadian Wholesale Global Eqty Long Short | 41.13 | 31.03 | 15.79 | 1.26 |
| CFS FC Inv-Acadian Glb Equity LS | 41 | 30.91 | 15.49 | 1.29 |
| Ironbark Royal London ConcentratedGlbShr | 35.83 | 21.49 | 15.14 | 0.90 |
| PM Capital Global Companies | 33.75 | 25.47 | 13.66 | 1.09 |
| Loftus Peak Global Disruption | 33.75 | 8.61 | 13.26 | 1.20 |
| Aoris International Fund A | 24.89 | 14.36 | 13.13 | 1.5 |
| Capital Group Global Equity (AU) | 38.74 | 17 | 12.89 | 0.75 |
| GQG Partners Global Equity Fund | 20.9 | 10.62 | 12.69 | 0.75 |
| Aoris International Fund B | 24.33 | 13.92 | 12.67 | 1.10 |
Global large cap shares worst performing managed funds over 5 years
| Product Name | 1-Year Return | 3-Year Return (p.a.) | 5-Year Return (p.a.) | ICR (fee %) |
| Strategic Global Fund | 2.07 | -10.84 | -10.24 | 1.91 |
| Frazis Fund | -5.56 | -22.88 | -8.17 | 1.50 |
| Mittleman Global Value Equity I | 6.61 | 4.45 | -6.51 | 1.25 |
| Lumenary Global Founders | 6.46 | -8.89 | -3.55 | 0.01 |
| i Capital International Value | 11.31 | -5.75 | -2.78 | 2.99 |
| Bateau Global Opportunities | 20.33 | -2.9 | -1.86 | 1.9 |
| Nikko AM ARK Global Disruptive Innovt | 7.35 | -20.61 | -1 | 1.35 |
| OnePath OA IP-Platinum International NE | 13.15 | 5.04 | 1.61 | 2.99 |
| ANZ OA IP-Platinum International EF | 10.07 | 4.62 | 1.69 | 2.14 |
| OnePath OA IP-Platinum International EF | 10.07 | 4.65 | 1.72 | 2.14 |
Stockspot verdict: Our preference leans heavily towards the Global 100 ETF (ASX:100) over any of the active funds currently on offer. Considering the significant level of underperformance exhibited by active funds, we find no compelling justification to incorporate them into the portfolios we recommend to our clients.
| Product Name | 1-Year Return | 3-Year Return (p.a.) | 5-Year Return (p.a.) | ICR (fee %) |
| iShares Global 100 ETF (ASX:IOO) | 24.14 | 14.93 | 12.64 | 0.4 |
Someone investing $100,000 into global shares five years ago would be $38,000 better off investing in the IOO ETF compared to the average global active managed fund.
