The March quarter saw active management pay off in half of the asset classes tracked by Melville Jessup Weaver (MJW).
According to the researcher’s latest investment survey, the median manager outperformed over the March quarter in seven of the 14 MJW asset categories.
The result marked an improvement on the December quarter where the median manager beat the index in just four asset classes during a period where almost all benchmarks plumbed sub-zero depths.
Global asset classes, in particular, benefitted from an active tilt during both of the last two quarters as the median manager for core NZ fixed income and equities fell just off the benchmark pace.
In both quarters, the median global shares growth manager covered by MJW came out well above index while the stylistic opposite offshore equities value firms fell behind benchmark.
During the March quarter the median global growth manager outperformed the unhedged index by about 2 per cent, returning 12.7 per cent against the benchmark 10.6 per cent.
Overall, the March results were almost a mirror image of the December figures with all asset classes back in the black following the horrorshow end to 2018.
The whiplash-inducing market recovery over early 2019 saw most equity indices in the MJW survey up by more than 10 per cent in the March quarter while bonds bounced between 2.5 to 3 per cent during the same period.
Consequently, the sharp turnaround also disrupted MJW manager rankings across all asset classes for three-month and one-year periods in particular.
Ben Trollip, MJW principal, says in the March report that a “dovish turn by central bankers around the world ignited the gains”.
“Through the quarter, policymakers from the US to Europe to Australia and New Zealand either appeared to pause their tightening stances or signal a potential loosening of monetary policy,” Trollip says.
However, he says investors shouldn’t exit the asset class despite yields hitting historic lows as bonds still offered “insurance” value against equity market disasters.
While the insurance ‘premium’ of bonds may have risen of late, it was still “available cheaply – at least much more cheaply than hedge funds and other esoteric strategies designed to hedge the portfolio”, Trollip says in the report.
Bond portfolios could face losses over some periods, he says, but cutting exposure would be “akin to failing to renew your home insurance because your premiums had gone up”.
Trollip says investors should maintain a diversified bond portfolio using “high quality” managers with the ability to actively-manage duration.
“[Bond managers] should be monitored against the index and their peer group, rather than purely on the yield they generate,” he says. “One should be rightly suspicious of the defensive aspects of any bond portfolio still offering a premium yield in today’s environment.”