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Hedge Clippings | 14 November 2025 Any lingering chances of a rate cut before Christmas - already unlikely given the uptick in the September quarter CPI to 3.2% - went out of the window yesterday when the October Labour Force figures were released, showing unemployment had dropped to 4.3% after rising 4.5% in September. The number of unemployed people dropped by 17,000, while the ranks of the employed increased by 42,000. If that's the case, there's no RBA meeting in January, so speculation will have to wait until February, but mid-2026 or even beyond is looking more likely. At the same time, the chances of a rate cut in the US - widely expected just a few weeks ago - also dropped to around 50/50 as a result of conflicting economic signals, thanks in part to the lack of data as a result of the US Government shutdown, a weakening labour market, and concerns about sticky inflation. There's time for the odds to move either way before the next FOMC meeting due on the 9th-10th of December. Meanwhile, among signs of stretched valuations and increasing equity market volatility - not only in the tech sector, but also amongst some local high-flying small-cap stocks we have taken a look at the performance of managed funds in the Australian Small to Mid-cap Peer Group. Not surprisingly, given the performance of the respective ASX200 and ASX Small Ordinaries indices, small caps outperformed large cap funds. The average return of all 97 funds in the small cap universe, broadly in line with the index over 1 - 5 years, will give encouragement to those who advocate passive investing via ETF's with their accompanying low fees. By filtering the list using AFM's Star Rankings, and only selecting funds with 4 or 5 Stars over 3 & 5 years, we created a portfolio of Top 10 funds which significantly outperformed the index. Using the same process to look at those funds with only 1 or 2 Stars, to come up with the bottom 10 funds, the result was equally predictable. Obviously, as in stock selection, manager selection is essential. Given that past performance cannot be guaranteed, how does one look at historical fund performance? We would suggest ignoring (or at least not jumping at) one-year performance. It can be misleading unless 3, 5 or 7 years is equally good. Taking 5 years covers a sufficient period, and then ensuring that the shorter-term performance is consistent. AFM's Star Ranking enables filtering on both performance and risk/volatility, and while not in-depth, it provides an initial, and significantly effective, and fast process to sort the wheat from the chaff and then allow concentrated analysis of the resulting funds. Of significant interest was the analysis of the funds at the bottom of the list based on recommended research ratings. In spite of these having a track record of being in the 3rd or 4th quartile performance over 1, 3, and 5 years, most of them came with "recommended" and in a couple of cases "highly recommended" research ratings from Zenith, Lonsec, Morningstar, or SQM. In fact, only one of them (yes, 1 out of 10) didn't have a rating. Which leads us to the question: What value can you put on (paid) research? News | Insights New Funds on FundMonitors.com Research house scrutiny needed | Fundmonitors.com Trip Insights: The US | 4D Infrastructure October 2025 Performance News Bennelong Emerging Companies Fund Quay Global Real Estate Fund (Unhedged) Bennelong Twenty20 Australian Equities Fund |
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