Thu, Sep 24, 2020 – 3:09 PM
[LONDON] The failure of equity fund managers to deliver outsize returns commensurate with the fees they charge for their stock-picking services continues to be a source of ammunition for advocates of lower-cost index tracking products. Less scrutinised, although equally dreadful, is the seeming inability of their bond brethren to offer a fixed-income alternative that can generate benchmark-beating performance.
Hence the existential crisis that still threatens the entire active fund management industry. The pandemic, it seems, hasn't changed anything, according to S&P Global's (S&P) Dow Jones Indices Unit's just released update on how the active crowd is doing compared with the benchmarks against which its performance is measured – or, perhaps more accurately, against the index-tracking funds that investors can buy to gain market exposure at a lower cost. Overall, it's not a pretty picture.
In the first half of the year, fewer than a third of US domestic equity fund managers delivered annualised returns that outpaced the S&P Composite 1500 Index. While that's their best – or least-bad – performance compared with longer periods, it still destroys the argument that stock pickers can outperform in volatile markets. It means even amid the pandemic-inspired swings seen in equity prices in recent months, two-thirds were still unable to beat the index.
The fixed-income crowd has done even worse. Less than 10 per cent of active bond portfolio managers outstripped their relevant benchmarks in most debt categories, according to the data compiled by S&P. Even in high-yield securities, the index managed to beat two-thirds of bond managers.
And that's just measured over a one-year period. Extend the analysis over a longer horizon, and the paucity of performance becomes even more apparent.
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Those figures for emerging market debt funds are not an error. Precisely none, Read More – Source