Key Points:

- We compared the fund (Aberdeen Singapore Equity) against the benchmark (Straits Times Index) over a period of 32 quarters
- During periods of outperformance, Aberdeen Singapore Equity returned an average of 4.3%
- During periods of underperformance, Aberdeen Singapore Equity returned an average of -3.6%
- During periods of market performance, Aberdeen Singapore Equity returned an average of 0.11%
- Aberdeen Singapore Equity clearly outperforms the benchmark over the period examined

Any good disclaimer will tell you that past performance is not indicative of future performance. It’s true, a coin flipped 49 times gives no insight into which side the coin will land on flip number 50.

But we can make observations about the past performance of a fund’s investment process and see where it tends to 1) outperform, 2) underperform and 3) market perform the benchmark.

We define ‘market performance’ as performance within 2.5% of the market’s performance in either direction. This allows for clearer outperformance (performance exceeding 2.5% of the benchmark’s return) or underperformance (performance less than -2.5% of benchmark returns). Observations will be made on a quarterly basis. Our fund for this article is the Aberdeen Singapore Equity and its relevant benchmark is the Straits Times Index.

We’ll look at 8 years of quarterly data. Why 8 years? The standard 5 years captures both up, down and sideways markets. However 8 years provides 32 quarters of data, and when making observations about data, the general idea is more is better. All returns in SGD terms, dividends reinvested for both the fund and the benchmark.

With all that settled, we can move on the chart.

The Chart

From the chart, we can gauge Aberdeen Singapore Equity outperforms roughly half of the time. The biggest outperformance came in 1Q2008, where the fund outperformed by 10.51%. The fund’s biggest underperformance of -3.86% came in 2Q2006.

The most number of consecutive quarters of underperformance came in 3Q and 4Q 2003 – two consecutive quarters.

Out, Under, and Market Performance

Taking this one step further, we looked at the fund’s performance across three market scenarios:

1. Down market - STI quarterly return below -2.5% (Table 1)
2. Up market - STI quarterly return above 2.5% (Table 2)
3. Sideways market - STI quarterly return within 2.5% to -2.5% (Table 3)

In Table 1, during periods of downwards market movement, the fund displays an roughly equal number of periods of outperformance, market performance and underperformance.

In Table 2, during periods of upwards market movement, the fund shows a similar pattern, with one additional period of underperformance. The majority of periods kept pace with the market.

In Table 3, during periods of sideways market movement, the fund shows two periods of outperformance, and no periods of underperformance.

Overall, Aberdeen Singapore Equity outperforms (6 observations) roughly as often as it underperforms (5 observations) and the majority of the time, keeps within +/- 2.5% of the STI (21 observations).

On average, however, Aberdeen Singapore Equity shows how it manages to beat the benchmark. Its mean (i.e. average of the periods observed) outperformance was 4.3%, while its average underperformance was -3.6%. Its average market performance was 0.11%, adding a further bias to the outperformance of the fund. Table 4 summarises this.

Conclusion
Aberdeen Singapore Equity is a clear outperformer over the periods we examined. While the number of periods of outperformance roughly equal the periods of underperformance, the magnitude of outperformance is larger. Furthermore, during periods of market performance, the fund tends to perform positively.

If you have any comments, questions or complaints about the article, feel free to drop a feedback post in our forum, or email me: nicholastay@fundsupermart.com

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