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 the consecutive three-year period, 13.6% of funds consistently maintained top-quartile rankings and 29.4% of funds beat their benchmark consistently.
- Over the consecutive five-year period, only 3.0% of funds consistently maintained top-quartile rankings and 4.4% of funds beat their benchmark consistently.
- Top-quartile and outperforming Australian funds did not show strong persistence over two non-overlapping three- and five-year periods, though they tended to have lower liquidation rates.
- Only 32% of funds maintained top-quartile rankings over two successive three-year periods and fewer (28%) did so for two successive five-year periods.
