Over half of active funds invested in the UK equity market and denominated in sterling, underperformed the S&P UK benchmark in 2014, with small-cap performance particularly hit.
The results are in stark contrast to 2013 when only 11% of actively managed funds failed to beat the benchmark.
Fifty-five per cent of managers overall underperformed in 2014, and 72% of small-cap managers, according to the Spiva scorecard – a report from S&P Dow Jones Indices that analyses active and passive investment performance.
However, taken as a group, over half of large and mid-cap managers outperformed their benchmarks, the report suggests. Spiva notes that 42% underperformed.
Sterling-denominated funds invested in European equities did better than their euro counterparts, with 39% of the former underperforming the S&P Europe 350, compared to 83% of euro funds.
The majority of actively managed US, global and emerging market equity funds denominated in sterling also trailed their benchmarks. Over 80% underperformed in US and global equities, and 63% underperformed in emerging market funds.
The Spiva scorecard benchmarks funds against indices offered by S&P.
Last year volatility in the markets stemmed from uncertainty about European Central Bank plans for stimulus. The report says that volatility is usually considered fertile ground for active fund managers as they could utilise stock-picking skills to benefit from discrepancies in markets. The results suggest they struggled to do this.
Active managers complain that reports that show active management in a bad light are skewed by index-hugging funds. Earlier this year, Natixis Global Asset Management said
it was considering publishing its ‘active share’ in an attempt to distinguish itself from huggers.
©2015 funds europe