The FSA Spy market buzz – 22 November 2024
Dimensional excludes the Middle Kingdom; JP Morgan’s optimistic outlook; Household wealth is rocketing; Schroders is thinking about privates; Ninety One’s pithy AI; German woes and much more.
Pictured: Three-year performance of the two funds, the MSCI Europe Small Cap Index and the fund category average.
“The quality approach has been struggling, especially in 2016, when quality has been out of favour” said Van Genderen. At the same time, “small caps have been performing quite well compared to large caps,” he added.
In evaluating the performance of the Kempen fund, one has to take into account the recent incorporation of the ESG criteria and changes in the fund’s management team since 2010.
The Kempen fund performed better than the Allianz fund on a three-year basis. It also had a higher alpha, a lower beta, a higher Sharpe ratio and lower volatility. By all these measures, it did better than the Allianz fund, even though that amounted to outperforming its benchmark MSCI Europe Small Cap Index by only a fraction of a percent.
On a one-year basis, both funds delivered similar returns while underperforming their benchmarks.
“The [Allianz] fund’s short-term performance has deteriorated significantly over the past five full calendar years,” wrote Van Genderen in an April 2017 fund report. “The main reason lies in weak stock selection results.”
Names such as Betsson, a Swedish online gambling company or Bellway, a UK property developer, were among the biggest detractors in the Allianz fund in 2016, according to data from Morningstar.
Van Genderen said the incorporation of the ESG criteria into the Kempen fund investment process has in a sense made it a different product, similar to the firm’s Sustainable European Small Cap Fund, which is managed by the same team.
“[T]he long-term track record is no longer fully relevant given the turnover in the team and the change in process [to include ESG],” wrote Van Genderen.
However, the performance of the sustainable fund can be used for reference.
“The sustainable fund has not been performing very well, also based on a disappointing stock selection,” he said.
Allianz | Kempen | MSCI Europe Small Cap Index | |
3-year return (cumulative) | 38.38% | 45.15% | 45.02% |
1-year return | 27.56% | 27.43% | 34.05% |
3-year Alpha | -1.91 | 1.37 | |
3-year Beta | 1.04 | 0.90 | |
3-year Sharpe Ratio | 0.51 | 0.69 | |
3-year Volatility | 15.41 | 14.00 | 14.16 |
Data: FE, 31 October 2017, returns in US dollars. Ratios are annualised
Dimensional excludes the Middle Kingdom; JP Morgan’s optimistic outlook; Household wealth is rocketing; Schroders is thinking about privates; Ninety One’s pithy AI; German woes and much more.
Part of the Mark Allen Group.