Active manager returns lagged smart beta indices, Lyxor shows

The number of asset managers that beat benchmarks last year is reduced when smart beta benchmarks are used as comparisons.

Lyxor Asset Management found that 28% of active funds in Europe beat traditional benchmarks in 2016 ­– but this become just 13% when smart beta indices are used.

Lyxor analysed the performance of 3,871 active funds in Europe with €1,300 billion in assets under management.

The number of outperformers of traditional cap-weighted indices is lower than 2015 when 47% of the active managers beat their benchmarks.

Active managers that succeeded in outperforming their benchmark were overweight on the ‘value’ factor at the expense of low-beta, quality and momentum factors.

Markets were devoid of meaningful trends in 2016 and instead were dominated by “frequent stylistic rotation from one factor to another”, said Lyxor.

“In the current market environment, which is influenced more by politics than by the economy, it has been difficult for active managers to generate performance and take advantage of changes in trends in 2016,” said Marlene Hassine, head of ETF research at Lyxor, when Lyxor’s study was released earlier this week.

“These political uncertainties, still to the fore in 2017, particularly in Europe, are certainly going to make the task of investment managers harder in 2017”.

©2017 funds europe

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