WEAK: Study Shows 86% of Active Equity Funds Underperform

As markets roil, asset owners scratch their heads, asking if active management in listed equities truly adds value. Active managers are hired to “beat the market”. According to a detailed study conducted by S&P Dow Jones Indices LLC, 86% of active large-cap fund managers in Europe failed to outperform their benchmarks over the past decade. These European equity funds invested in global, emerging and U.S. markets. S&P Dow Jones Indices research also shows that 100% of actively-managed equity funds sold in the Netherlands failed to beat their benchmark over the past five years. The issue is not only with European fund managers; behavior is mimicked across the pond. The study highlighted, “over 84% of U.S. active funds underperformed the S&P 500 over the past one-year period.”

View the Study Here

At the same time, smart beta products and bespoke active mandates continue to gain traction, according to SWFI Compass, a service that tracks opportunities and RFPs by asset owners such as sovereign wealth funds, pensions and endowments.

Active management is under attack in the current low-yield environment. Even absolute return programs as pensions such as CalPERS have shuttered operations.


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