Investment performance from growth strategies lagged in 2025 as investors rotated away from structural growth stocks and toward resources and value-oriented stocks, according to Lonsec.
The research and financial services firm said small capitalisation companies delivered excellent returns, with the S&P/ASX Small Ordinaries Index rising 24.96% last year.
“Small caps finally had their day in the sun,” Director of Research Peter Green said in a media release.
Green said gold miners also stood out as they benefited from a 65% increase in the spot gold price.
Green said the technology and healthcare sectors contracted by 19.1% and 23.9%, respectively, while resources and materials delivered impressive gains of 36.2% and 37.5%, significantly affecting growth managers’ relative performance.
“We saw a clear shift in market leadership this year,” Green said.
The firm released a new analysis of Australian equity market performance in 2025, which highlighted a challenging period for growth strategies, strong dispersion among active managers, and renewed momentum in the small‑cap sector.
“The findings also point to meaningful structural shifts driven by superannuation fund flows and the continued rise of passive investing,” Lonsec said.
The firm also noted heightened volatility during the February 2025 and August 2025 reporting periods with large price reactions when company results differed from expectations.
“Managers have been more active leading into reporting season as earnings guidance becomes an increasingly important driver of performance,” he said.
The firm also highlighted long‑term structural changes affecting market dynamics, with top industry super funds accounting for 12% of capital in the sharemarket, passive investing accelerating, and initial public offer activity remaining subdued.
“These structural forces are reshaping the Australian equity landscape,” Green said.
“They affect everything from liquidity to price discovery and create both headwinds and opportunities for active managers.”
