JANA’s long serving Head of Investment Outcomes, Steve Carew has analysed the performance of JANA’s advised funds over the long term, and concludes that size of fund has not been a major factor in investment performance outcomes.
“Over the medium term (i.e. the past five years) on average, many of our medium and smaller sized funds have performed just as well as the largest mega-funds.”
Over the very long term (i.e. of 10 years), the JANA advised mega-large funds have performed a little better as a group, but it has not been consistent across all funds”, Mr Carew said.
“Majority of mega-large JANA advised funds over ten years have been top quartile performers.”
The medium and smaller funds over this period have had more diverse outcomes, with 90% being in the top two quartiles.
Interestingly, over the past five years, 56% of small and medium sized advised funds have been top quartile performers, in line with the performance of the mega-funds.
However, Mr Carew warns that it is problematic to strictly compare the performance of different funds, as each fund has its own objectives based on liquidity needs, membership make-up, age profile, gender and overall risk preferences.
While large funds have the advantage of lower fees in some areas, and access to very large scale investments like direct investments into infrastructure, smaller funds have the advantage of being able to access smaller (and potentially sweeter) deals, and can be more nimble.
As an example, in the last year three JANA advised mid/small funds were ranked in the top 10 performing funds in 2017.
While still maintaining JANA’s overall advice to be underweight growth assets and equities in particular, it was the direct targeting of these risk assets that gave these funds superior returns.
Overweights to small caps, emerging markets and global equities over the more traditional indices added substantial value, in some cases by more than 10% for the year.
Ultimately, the primary determinant of performance has been less about size but more about taking risk in the right places; active management and access to unlisted portfolios.