Active funds underperform over time

S&POver nine out of ten actively-managed US equity funds domiciled in Europe failed to beat their benchmark over a ten year period according to research.

The bi-annual S&P Indices Versus Active Funds Europe Scorecard revealed long-term underperformance by actively-managed funds in a range of categories, which will fuel the debate about active versus passive fund management.

European-domiciled US and emerging market equity funds remained among the region’s worst-performing active fund categories. Euro-and sterling-denominated funds investing solely in US equities produced returns below their local currency S&P 500 benchmark for all periods analysed. Less than one-third of these funds outperformed in 2017 and less than one-tenth outperformed since 2008.

Over a ten-year period 85% of sterling-denominated actively-managed emerging market funds underperformed their benchmark the S&P/IFCI, while 63% underperformed over a one-year period.

Three-quarters of sterling-denominated actively-managed UK equity funds underperformed the S&P United Kingdom BMI but over a one-year period 54% outperformed the benchmark.

Actively managed sterling-denominated European funds saw 39% of its group underperform the S&P Europe 350, a figure which rose to 75% over a ten year period.

UK actively managed sterling-denominated small-cap stocks did well, with 72% beating the S&P UK Small Cap Index and generating average returns of 9% above the benchmark over a one year period. However, over a ten-year period, the outperformance dropped to 0.6%.

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