Where passive exposure paid off in Q3

Active_vs_PassiveFund investors who were passively exposed to certain euro fixed income assets and US equities in the third quarter (Q3) were vindicated, research shows.

Lyxor, the French fund management group, showed that just 31% of active fund managers across equities and bonds outperformed their benchmarks during the quarter due to a mix of low volatility and low rates.

This was a fall of 24% compared to the previous quarter.

“In Q3, given the limited number of euro investment grade credit, euro govies and US equity active managers that beat their benchmark, it would have made more sense to select passive management, said Marlene Hassine Konqui, head of ETF research at Lyxor.

However, more than half of active European equity managers outperformed during the quarter, with 53% of large and mid-cap funds outperforming, “well above the long-term average”.

This was because active managers successfully moved into cyclical securities in order to capitalise on the European recovery, capturing the momentum of high beta stocks, according to the research.

But equities overall saw just 35% of managers outperform compared to 63% in the previous quarter.

Lyxor described Q3 as challenging for equity managers due to macroeconomic stability and low volatility, and difficult for bond managers due to lower rates.

For fixed income managers, the stable rate environment meant only 26% of euro government bond managers and 9% of high yield debt managers outperformed.

Rallying credit spreads hindered high yield managers holding more defensive positions, said Lyxor, and only 22% of corporate bond managers outperformed their benchmarks during the period.

The figures are from Lyxor’s ‘Manager Monitor’ quarterly research.

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