Some funds, such as Bennelong Fund, also charge an additional performance fee when the fund generates returns beyond a margin above the reference benchmark.

Among the top five best performing funds was the Alleron Growth High Conviction Equity fund, which generated performance of 24 per cent in 2017.

“We want to see evidence of significant change that is not encapsulated in the share price,” Alleron Investment Management senior portfolio manager Alan Kwan said.

“We are looking for growth, and most of the time that leads us to mid-cap names,” Mr Kwan said, referring to companies at the smaller end of the top 100 by market capitalisation.

Mr Kwan pointed to holdings in Treasury Wine Estates and hearing implant manufacturer Cochlear as examples of outperforming stocks in 2017. “There is still significant potential growth for Cochlear.”

“They recently announced they were setting up a facility in China – it looks like they have been invited in.”

It was a tough year for funds with little or no exposure to resources names, with the materials and energy sectors jumping by more than 20 per cent over the year.

After healthcare name CSL, BHP Billiton and Rio Tinto were the largest single contributor’s to the sharemarket’s gains in 2017, as they lifted 22 per cent and 33 per cent, respectively.

Among the top five best performing funds was the Alleron Growth High Conviction Equity fund, which generated performance of 24 per cent in 2017.

That led two funds managed by well-known house Investors Mutual to sink to be among the worst performers in 2017 as a result of generating reasonable 8 per cent returns, but shy of the benchmark’s 12 per cent and a fraction of the top performers.

Fortescue was a significant underperformer in the mining space in 2017, but Mr Kwan has kept the faith in what he believes is a high quality business.

“We think [the stock] is significantly undervalued relative to the likes of BHP and Rio Tinto.”