Zenith has just released its 2016 Australian Large Companies Sector Review, and once again, the managers on Zenith’s Approved Product List (APL) have outperformed the index.
Commenting on the review, Quan Nguyen, Senior Investment Analyst and Zenith’s lead analyst on the Australian Shares – Large Companies sector said, “On average, funds on Zenith’s Approved Product List returned 1.5%, net of fees for the 12 months ending 31 May 2016, which represented an outperformance of 3.6% relative to the S&P/ASX 300 Accumulation Index.”
In summarising the findings of the review, Nguyen highlighted “The key driver of outperformance for Zenith’s rated active funds has been stock selection. In particular, the stock selection driven decline in exposure to Blue Chip stocks (the S&P/ASX20 Index) has been a trend that has paid off.”
Commenting further, Nguyen said, “For the concentrated managers within the sector, the average exposure to the Top 20 stocks dropped by almost 10% from 2014 to 2016. Furthermore, the S&P/ASX 20 segment of the market materially underperformed the broader index over the last 12 months (ending 31 March 2016), with the ex-20 segment of the market returning 3.4% versus -16.2% for the S&P/ASX 20.”
“The Blue Chip/Top 20 index is dominated by Australian Bank stocks, and this has been one of the hardest hit segments of the market over the last 12 months.”
Nguyen also noted: “For some time, Australian Blue Chip stocks have been among the highest yielding segments of the market. The reversal in relative performance of Blue Chips, has definitely made investors question whether the yield trade is over?”
Zenith believes that while the spread between the RBA cash rate and the market dividend yield remains relatively wide, high and stable dividend paying securities will remain attractive to income seeking investors. In other words, while interest rates remain at record lows, investors will continue to look to high and stable dividend paying stocks as an income source.
Nguyen concluded: “As part of the review, Zenith surveyed all managers on forward looking market prospects. In aggregate, the Australian equities managers Zenith reviewed identified the S&P/ASX 51 to 100, or Mid Cap, segment of the market as being the most attractive for the next 12 months.”
Summary of the Zenith 2016 Australian Shares – Large Companies Sector Review:
From an initial universe of 186 products:
• 13 were rated “Highly Recommended”
• 55 were rated “Recommended”
• 21 were rated “Approved”
• 5 were placed on “Redeem”
• 92 were “Not Rated”
