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Are active managers underperforming?

H1 2021 was bullish and active funds generally struggled to keep up with their benchmarks, says S&P Global


Pete Carvill

The S&P Europe 350 index outperformed 70.7% of active euro-denominated Europe Equity funds in the first half of 2021, according to data released by S&P Global.

This figure showed a marked increase from the 41.7% it reported for H1 2020, which the company said indicated that active managers may perform better in uncertain times.

In a statement, S&P Global said: “Accordingly, the one-year period outperformance for the same benchmark—which includes the uncertainty of the post-covid-19 market crash—was down to 50.7%. Similar outperformance patterns between the six-month and one-year periods can be seen across most of the fund categories.”

S&P Global’s full report said that H1 2021 was ‘characterised by a bullish and low-volatile stock market’.

In addition, the report said, “[…] active funds generally struggled to keep up with their benchmarks. However, over the one-year timeframe, a larger percentage of active funds outperformed.”

2020 outlier

There was a marked difference in the percentage of European equity funds outperforming benchmarks over varying timescales. While 70.75% of European equity funds had been outperformed by the S&P Europe 350 index over the year-to-date, this was a marked increased from the one-year measure of 50.70%.

But over three, five, and 10 years, the figures stood at 72.34%, 73.24%, and 84.77%, indicating that 2021 was very much a return to business as usual after the travails of 2020.

Figures for Eurozone equity funds compared to the S&P Eurozone BMI saw little dramatic movement, from 91.96% over 10 years, to 87.54% over five, to 81.38% over three years, to 75.44% and 70.04% over one year and in the year to date.

Regarding these figures, S&P Global wrote: “The relatively better performance by active funds during 2020 was not sufficient to compensate for the long-term trend. Every fund category saw its benchmark outperform at least 50% of the funds in the 10-year period, with averages greater than 80%.”

The company added: “The low market volatility experienced during the first half of 2021 affected fund performance dispersion as well. The interquartile range of the performance of Europe Equity funds was just 4.2%, whereas the same metric stood at 8.1% in 2020. This highlights that active funds generally performed more similarly to their peers in the calmer market environment.”