Chester Opportunities Fund leads Mercer tables with 25.4pc return as sustainable funds dominate FY25 investor winners

Stock selection proved decisive in crowning winners over the 2025 financial year, with sustainable funds benefiting from their avoidance of struggling materials and energy stocks.

Banks and tech companies thrashed returns from mining stocks in FY25. Picture: ANGELA WEISS / AFP

Chester Opportunities Fund beat the pack and the market, delivering a stellar 25.4 per cent return over the 2025 financial year to be crowned the top performing equities manager by Mercer.

The result caps a challenging year for active fund managers when sustainable strategies dominated the leaderboard according to the fund ratings house amid significant sector dispersion across Australian shares.

Arcadian Australian Long-Short Equity secured second place with a 23.3 per cent return, followed by Ausbil Active Sustainable Equities at 22.3 per cent. All figures are before fees.

Pendal’s Horizon Sustainable Australian Share Fund rounded out the top with a 22 per cent return and its Sustainable Australian Share Fund claimed fifth position with a 20.2 per cent return. Featuring in the top ten are Dimensional Australian Sustainability Fund, Chester High Conviction Fund, Alphinity Sustainable Share, Arcadian Australian Equity, and Firetrail High Conviction.

The 2025 financial year marked a departure from typical performance patterns among active managers, according to Mercer head of equities Shannon Reilly.

“While the leaderboard among active managers is often determined by a manager’s style bias, with either growth or value typically dominating, the 2025 financial year proved different,” Mr Reilly said. “Company selection and sector allocations defined success.”

The banking sector was a key performance driver, with Commonwealth Bank shares generating 30 per cent of the overall return of the ASX 300. CBA makes up almost 11 per cent of the index by market weight.

Sector performance varied dramatically during the period, with financials surging 29.2 per cent while materials declined almost 2 per cent.

Energy stocks fell 8.4 per cent as commodity prices weakened and recession fears weighed on miners.

“Over the financial year, more than 30 percentage points separated the returns of the two major sectors,” Mr Reilly said. BHP was the biggest drag.

Sustainable funds benefited from their structural avoidance of energy and materials companies, redirecting capital toward banks and software stocks.

The S&P/ASX 300 returned 13.7 per cent for the financial year, with the corresponding ASX 50 index delivering 13.5 per cent.

Information Technology posted a quarterly gain of 26.9 per cent in the June quarter alone.

The uneven returns highlights the importance of picking the right manager for investors seeking to back stock pickers.

“The dispersion we saw in the Australian equity market over the year, and the median managers’ underperformance, was once again proof that having an edge in manager selection and portfolio construction is key to delivering consistent outperformance over time for investors,” said Mr Reilly.

Originally published as Chester Opportunities Fund leads Mercer tables with 25.4pc return as sustainable funds dominate FY25 investor winners