Mercer performance tables: Forager, Chester, Acadian on top as ASX plunge rips through fund returns

More than 85 per cent of Australia’s equity funds are in negative territory in the three months to the end of March in what has been the ASX’s worst start to the year since the pandemic.

Forager Funds chief investment officer Steve Johnson. Picture: Britta Campion

The sharemarket’s worst start to the year since the pandemic has ripped through equity fund returns, with the overwhelming majority – more than 85 per cent – in negative territory for the three months to the end of March.

Just 17 of 125 Australian share funds made gains over the quarter as markets tumbled on fears US President Donald Trump would ignite a global trade war.

The best of the lot, the Collins St Value Fund, returned 3.7 per cent, before fees, compared to the worst, Hyperion Australian Growth, which plunged 15 per cent, according to Mercer’s closely watched Investment Performance Survey.

Hyperion’s tumble is in stark contrast to its performance in 2024: the fund returned 31 per cent for the 12 months to the end of December to take the No.1 spot in Mercer’s previous survey.

The market’s rude awakening after a sanguine 2024 has also ­severely dented one-year returns.

Only one fund notched a gain above 20 per cent over the 12 months to the end of March, and only two more recorded returns greater than 10 per cent.

Most funds in the top 10 delivered gains of less than 8 per cent over the same period.

This compares to returns of between 20 per cent and 30 per cent for all top 10 Australian equity funds for calendar 2024.

The Forager Australian Shares Fund, a small cap specialist, came out on top for the year to March 31, notching a gain of almost 22 per cent over the 12 months.

The Chester Opportunities Fund and Acadian Australian Long Short Fund took second and third place, with returns of 13 per cent and 11 per cent, respectively.

But investors thinking of lobbing money at the top performers will need to give the Chester ­Opportunities Fund a miss – the fund is in wind-down mode and closed to new investors.

Pendal’s Horizon Sustainable Australian Share Fund, in fourth place, returned 9.4 per cent, while funds ranked fifth to 10th – the Chester High Conviction Fund, Paradice Australian Equities, Pendal Sustainable Australian Share Fund, Alphinity Concentrated Aust, QVC Long Short and Ausbil Active Sustainable Equities – all returned between 7 per cent and 7.6 per cent.

Forager chief investment officer Steve Johnson said a handful of stocks, mostly in the technology sector, had delivered the fund’s outperformance for the year. These included sports analytics play Catapult, which surged 125 per cent, Bravura Solutions, up 65 per cent, and RPM Global, up 30 per cent.

“All these stocks we’ve made money out of have been through quite significant periods of unpopularity,” Mr Johnson said.

“Catapult listed in 2016 and the share price got up to $4 at one point. Then it was down at 70c two years ago, $1.50 a year ago, and it’s now at $3.85. So it’s basically just a recovery story. People got too optimistic and they got far too pessimistic.

“With all of these it’s that switch from a company losing money and there being no end in sight, to then the revenue line growing and there’s actually cash and profit. Everyone can see that path to generating profits and so that’s triggered the change in investor sentiment towards some of these stocks.”

There are plenty of beaten-up former darlings to sift through for the next batch of winners, such as Johns Lyng and PWR, he said. “These were very, very highly regarded small cap stocks that were trading at overly optimistic prices. Their share prices are down 50, 60 per cent, so it’s pretty fertile ground for someone looking for some opportunities.”

The five-year return for Forager’s Australian Shares Fund – 26.5 per cent a year – puts it in the No.2 spot on the longer-term basis, according to Mercer. It is ranked 11th over three years with a 7.5 per cent return. The fund just edged into negative territory in the March quarter.

Acadian’s Australian Long Short Equity, in third place over the 12 months to March 31, uses data and AI to pick its winners.

The quant fund’s best performers for the past 12 months were Aristocrat Leisure, Qantas and a short position in NextDC.

It is the “Toyota of fund managers”, portfolio manager Zhe Chen told The Australian.

“Research is at the centre of everything we do. We’re not handicrafting investment decisions, we’ve built a really great machine to do that,” he said.

All up, the fund collects about 500 million data points a day across a global investment universe of about 40,000 stocks. In Australia that universe is about 1000, of which 600 would be investible in terms of liquidity.

The fund returned -3.4 per cent in the March quarter, with Dr Chen saying it was “naturally exposed to the momentum trade” of last year and subsequently its unwinding.

Of the top 10 funds, the Chester Opportunities Fund and Chester High Conviction Fund, run by Rob Tucker and Anthony Kavanagh, were the only two that delivered positive returns in the first quarter of this calendar year.

Over the year to the end of March, the median Australian equity fund return, at 2.5 per cent, underperformed compared to the benchmark (2.6 per cent for the S&P/ASX 300 and 2.8 per cent for the S&P/ASX 200). The median return over three and five years topped the benchmark and it was in line with the index on a three-month basis.

Originally published as Mercer performance tables: Forager, Chester, Acadian on top as ASX plunge rips through fund returns