EXECUTIVE SUMMARY
- While comparing active funds against their respective benchmark indices is a typical practice to evaluate their performance, persistence is an additional test that can reveal fund managers’ skills in different market environments.
- In this report, we measure the performance persistence of active funds that outperformed their peers and benchmarks over consecutive three- and five-year periods, and we analyze their transition matrices over subsequent periods.
- Overall results suggested only a minority of Australian high-performing funds persisted in outperforming their respective benchmarks or consistently stayed in their respective top quartiles for three or five consecutive years.
- Over a consecutive three-year period, 27.5% of funds consistently maintained top-quartile rankings and 38.8% of funds consistently beat their benchmark.
- Over a consecutive five-year period, only 1.0% of funds consistently maintained top-quartile rankings and 2.2% of funds consistently beat their benchmark.
- Top-quartile and outperforming Australian funds did not show strong persistence over two non-overlapping three- and five-year periods, though they recorded lower liquidation rates.
- Only 36.6% of funds maintained top-quartile rankings over two successive three-year periods and fewer (26.9%) did so for two successive five-year periods.
- Among Australian funds that outperformed their benchmarks, 47.1% consistently beat their benchmarks consecutively over the three-year period and only 26.5% of them did so for the five-year period.
