What makes a top performer

‘“Yield means that the profits are getting paid out rather than reinvested in the company”’

Actively managed funds are facing stiff competition from passive exchange traded funds (ETFs), with the latter consistently outperforming the former. But that doesn’t mean that actively managed funds can’t outperform. So, what sets apart the funds that do generate returns consistently above the market?

Fund managers and their critics consistently measure performance against benchmark indices, but getting overly caught up in performance relative to an index might be what holds many fundies back from achieving consistent outperformance.

Australian Ethical and Cyan Investment Management are two small-cap fund managers that consistently outperform the index.

Australian Ethical’s emerging companies fund has averaged a return of 19.5%pa since inception compared with the S&P/ASX Small Ordinaries Industrials index’s 10.9%, while Cyan’s C3G fund has returned 15.4%pa since inception compared with the Small Industrials’ 9.6% over the same period.

But in terms of how they