You might not like to hear this but it’s now time to do an objective test on your ability to manage your own money. We know what some of the best fund managers and exchange traded funds/products have done so the really smart manager of money needs to put himself or herself to the test.
A number of forces led me to share the insight with that it’s time to test yourself to see just how good you are and whether it’s time to sack yourself as a fund manager (and my esteemed colleague also writes about why it’s important to review your investment abilities today too).
The $33 million dollar man
Alternatively, the better strategy might be to take a leaf out of the best paid Aussie fundie of all-time — Chris Cuffe. In reality, Chris was a bank executive but ran a massive funds business and became famous in 2003 when he got a golden handshake of $33 million!
This is the way the late Mark Colvin headlined the story on the ABC’s PM radio program: “Thirty three million dollars? Money well spent. That’s the way former Commonwealth Bank Executive Chris Cuffe sees his controversial golden handshake. In a written statement released this afternoon, Mr. Cuffe says the payment reflects his work at Colonial First State. He claims Colonial rose in value from $2 million to $5 billion under his leadership.”
AMP’s new chairman and a mate of mine was the CBA boss who paid the dough to Chris and this is what he told the ABC: “In this industry, there are very substantial salaries paid to people, and bonuses. That’s part of the industry. But the terms and conditions of this contract were not fully known to us at the time of the merger, and as I just said, had I negotiated them, I would not have negotiated a contract of that much.”
Anyway, that’s by the by. Later in life Chris threw his market knowledge into creating a fund — the Third Link Fund — that has a sideline of providing payments to charities. And even though he would have enormous knowledge of markets, companies and stocks, he has relied on a fund of funds approach, rather than being a stock-picker, like a lot of us.
When he kicked it off, I interviewed him and asked why a fund of funds? He said he wanted to tap into knowledgeable experts who live and breathe stocks 24/7 and so at the time he said he had selected 10 different fund managers to manage his clients’ monies.
All this is relevant as we can see what funds have done over the past financial year and it means we have a good testing material to size up our own investment prowess.
It comes when we’ve seen how some of our best super fund managers have performed. This Super Ratings table shows the median returns. (Paul recaps on this in his article as well and explains the importance of asset and sector allocation).
This ChantWest table below tells us the one-year hotshots and on a one-year basis, Host Plus was the star, as it often is. It’s interesting to see how many funds do well in the short and the long term. The likes of Australian Super, Cbus, Catholic Super and a few others have stood the test of time and are good yardsticks to compare your returns and even costs against.
These numbers made me pretty happy about the performance on SWTZ, which came in at 11.76% but to keep it in perspective I looked for what some highly competitive fund managers achieved to also try to understand why Chris Cuffe is a fund of funds man.
The best professionals
My old school mate from Waverley College in Sydney, Tony Boyd (aka Chanticleer in the AFR) over the weekend, got Lonsec to give him the latest take on the best fund managers over the past financial year. Being a product of a very competitive school like Waverley, Tony wanted to see how growth funds performed against value funds.
If you are not sure of the difference, this is how Investopedia sees it: “A value fund is a fund that follows a value investing strategy and seeks to invest in stocks that are deemed to be undervalued in price based on fundamental characteristics. Value investing is often compared with growth investing, which focuses on emerging companies with high growth prospects.”
The top three growth funds were Platypus Australian Equities Fund – Wholesale, which returned 25.92%, followed by Colonial First State Wholesale Australian Share Fund on 23.02% and Smallco Broadcap Fund at 21.6%.
In comparison, this is how the top three value funds fared:
- Dimension Australian Value Trust 16.66%
- Allan Gray Australian Equity Fund 16.07%
- Legg Mason Martin Currie Select Op – Class A 16%
Interestingly, growth funds have beaten up on value funds over a one, two, three and five-year basis, which is quite a surprise and maybe telling us that a contrarian might be looking for value funds to soon shine.
Tony also tapped into the knowledge of another buddy of mine, Chris Gosselin, the founder of Australian Fund Monitors, who pointed out some outlier funds even had better returns, and happily two of them are house experts who share their insights with my followers.
John Murray’s Perennial Value Microcap Opportunities Trust returned a huge 50.23% while Ben Griffiths, of Eley Griffiths Emerging Companies Fund, racked up a 41.89% result! These types of funds, with their unusual themes, find it hard to continually keep these returns up, but they fit the bill for anyone looking for a speculative play using a small percentage of one’s money.
I’ve said before that everyone should think about their core and satellite investments. Someone could create a core of 10 quality stocks that pay great dividends (and a fund like SWTZ could fit the bill) and maybe balance that off with something like iShares Core S&P/ASX 200 ETF (IOZ) to get access to the top 200 stocks. Last financial year, a 50:50 allocation to SWTZ and IOZ would have given an average return of about 12.5%.
That’s the core covered and for the satellite plays you could have five different funds including value, growth, overseas, bonds and some other theme such as robotics and AI.
On the other hand, you could do a Chris Cuffe and take the top five growth and the top five value funds to have exposure to 10 different, but quality, fund managers.
The point is that you need to make yourself sit an objective test on your ability to be your own fund manager and you also should be pondering whether you need a little help with your core and/or your satellite investments.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regard to your circumstances.