More than 70% of actively managed U.S. stock funds lagged their benchmarks over the five years ended June 30, according to the S&P Dow Jones Indices Versus Active (SPIVA) U.S. scorecard.
Hennessy Funds were an exception. Over those five years, nearly 70% of Hennessy’s funds beat their benchmark on an annualized basis.
The SPIVA U.S. scorecard measures performance of actively managed funds against their relevant S&P index in the stock market.
“The past five years (through June 30) have been marked by the rare combination of a remarkable rebound in domestic equity markets and a low-volatility equity environment,” Aye Soe, senior director, Index Research & Design, S&P Dow Jones Indices, wrote in the SPIVA report. Soe added, “This combination has proven difficult for domestic equity managers… across all capitalization and style categories.”
Among U.S. equity funds, 60% of large-cap, 58% of midcap and 73% of small-cap managers underperformed their benchmarks, according to SPIVA.
Managers of international equity fared worse. About 70% of global equity funds, 75% of foreign equity funds, 81% of foreign small-cap funds and 65% of emerging market funds lagged their benchmarks.
Yet of Hennessy Advisors’ 16 funds, which run $5.7 billion, six outperformed their indices for the 12 months ended June 30.
On a five-year annualized basis, 11 funds beat their benchmarks net of fees. Six of the 11 turned over their portfolios just once a year.
“It’s not timing the market, it’s your time in the market,” said Neil Hennessy, the firm’s president, chairman and chief investment officer. “We buy the stocks with a highly disciplined formula, and we hold for a year with no emotions. Then we do it again.”
The two best performers are Hennessy Japan Fund and Hennessy Japan Small Cap Fund.
Over the 12 months that ended June 30, the small-cap fund gained 28.68% vs. the Russell/Nomura Small Cap Index’s 17.21%, says Morningstar. Over the past five years, the fund’s annualized return of 15.13% beat the index’s 9.87% .
The Japan Fund’s 17.54% gain over the past year beat the Russell/Nomura Total Market Index’s 10.86% gain. The fund’s 14.40% five-year average annual return topped the index’s 7.48%.
Among U.S. equity funds, Hennessy Cornerstone Mid Cap 30 gained the most over the 12-month period. Its 31.95% outperformed the Russell MidCap Index’s 26.85%. On a five-year annualized basis, the fund returned 22.32%, beating the index’s 22.07%.
Hennessy Cornerstone Large Growth rose 29.35% over the 12 months ended June 30, exceeding the Russell 1000 Index’s 25.35%. Its five-year average annual return of 19.48% beat the index’s 19.25%.
Hennessy’s best funds over the five years held bonds and stocks. Hennessy Total Return Fund, at 75% equity and 25% bonds, beat the 75/25 Blended DJIA/Treasury Index 15.19% vs. 13.41% on an annualized basis.
Hennessy Core Bond’s 5.42% return outpaced the Barclays U.S. Government/Credit Intermediate Index’s 4.09%.
As for volatility, over the past five years each outperformer beat its bogey four years; the Mid Cap 30 outperformed just three years.
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