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While comparing active funds against a benchmark index is a typical practice used to evaluate their performance, persistence is an additional test that reveals fund managers’ skills in different market environments.
In this report, we measure the performance persistence of active funds that outperformed their peers and benchmarks over consecutive three- and five-year periods, and we analyze their transition matrices over subsequent periods. A minority of Australian high-performing funds persisted in outperforming their respective benchmarks or consistently stayed in their respective top quartiles for three consecutive years, and even fewer maintained these traits consistently for the five-year period.
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