Glenmore Asset Management’s Australian equity fund came out on top with the highest return in the 2023-24 financial year, according to Mercer’s latest investment survey.

The fund returned 31% before fees in the 12 months to June 2024, beating the 12.5% ​​return of its benchmark S&P/ASX All Ordinaries Accumulation Index.

The fund also holds the leading position over a three-year period, according to Mercer’s analysis, with a return of 17.2% per annum.

Meanwhile, ECP Asset Management's All Cap Australian Equities Fund came second in FY23-24 with a return of 29.1 per cent over the year, followed by Smallco's Broadcap Fund (26.2 per cent) and Selector Funds Management's High Conviction Equity Fund ( 20.5 percent cent).

The remaining top 10 performing funds were:
- Australian value of Forager (19.9 percent)
- Hyperion Australian Growth (19.5 percent)
- Auscap Long Short Australian Equities (19.3 percent)
- Platypus Australian Equities (19.3 percent)
- Tribeca Alpha Plus Fund (19 percent)
- Acadian Australian Long Short Equity (18.7 percent)

Reflecting on the results, Shannon Riley, Mercer's head of equities, Pacific, noted that Australian indices were modestly lower last quarter after two consecutive quarters of gains; however, June marked the end of a "solid" FY23–24.

"In line with the trend throughout the financial year, most of the returns for the quarter were generated through multiple expansion," he said.

“Long- and short-term strategies performed well in the June quarter, taking several places among the top 10 managers in Mercer's Australian equity investment manager universe. A theme among the group was the significant contribution that came from short exposures."

As for Australian fund managers, Reilly stressed that security selection and valuation discipline had supported the execution of a number of higher conviction value strategies, compared to the "AI euphoria" that drove the US market higher through June quarter.

"This has happened despite the continued strength of the big four banks, which are causing headaches for many active managers who are undervalued in this cohort due to share prices," Riley said.

"Throughout the financial year, more than half of market gains have been driven by the big four banks, which have benefited from the surprising resilience of the Australian economy to date."

By the end of June, Commonwealth Bank had taken over Citigroup and Mitsubishi UFG to become the world's 13th largest bank, he noted.

Still, the global optimism surrounding artificial intelligence had knock-on effects locally, with the information technology sector outperforming the broad market by more than 20 percent.

“The Quest for Data Center Development [provided] a tailwind for the likes of Goodman Group and Next DC. Goodman's size in the benchmark and its nearly 75 percent return for the year mean it is the strongest driver of total market returns outside of the big four banks,” Riley said.

In addition, Goodman is also a key contributor to strategies that were early identifying positions for the company in the data center search, he specified.