Battle of Persuasion: Active or Passive Approach, Which method prevails over time?
In the first half of 2021, stocks showed a strong performance, mirroring the global economic recovery. However, the year has proven to be a mixed bag for active fund managers, according to a recent analysis by Scope.
Over the past five years, only 443 out of 2,030 investigated funds have managed to outperform their benchmark index. This trend continued in the first half of 2021, with only 773 funds outperforming their benchmark. The rapid shift between investment styles, value and growth, in the overall market has made it challenging for fund managers to consistently outperform the benchmark index.
The poor performance of active fund managers is particularly evident in the peer groups "Japan Equities", "Europe Equities", "World Equities", and "Germany Equities". In these groups, the outperformance ratio was lower than in 2020. The strongest declines were recorded by "Germany Equities", with a drop of 23 percentage points, and "Europe Equities", with a drop of 22 percentage points. Experts attribute this poor performance to the high proportion of mid- and small-caps, around 20%, in these funds.
On the other hand, there were successes in the categories "Emerging Markets Equities" and "Eurozone Equities", but the 50% mark was not reached. In the peer groups "Asia Pacific ex Japan Equities" and "North America Equities", more than half of the actively managed funds outperformed their benchmark index.
The best-performing active fund category in Germany in the first half of 2021 was mixed funds ("Gemischte Fonds"). The ACATIS Datini Valueflex Fonds X TF Fonds achieved a 15.28% return over 12 months, which is 10% higher than the benchmark (MSCI Germany).
Figure 2 shows the number of funds with outperformance over one, three, and five years. While the outperformance ratio has fallen by eight percentage points compared to the whole of 2020, from 46% to 38%, the long-term picture is rather disappointing for active fund managers.
In conclusion, while stocks have performed strongly in the first half of 2021, the year has been a mixed year for active fund managers in terms of outperformance ratios. The rapid shift between investment styles and the high proportion of mid- and small-caps in some funds have made it challenging for fund managers to consistently outperform the benchmark index. However, there have been successes in certain categories, particularly in Asia Pacific ex Japan Equities and North America Equities. The long-term picture is disheartening for active fund managers, with the outperformance ratio falling over the past year.
Read also:
- Nightly sweat episodes linked to GERD: Crucial insights explained
- Antitussives: List of Examples, Functions, Adverse Reactions, and Additional Details
- Asthma Diagnosis: Exploring FeNO Tests and Related Treatments
- Unfortunate Financial Disarray for a Family from California After an Expensive Emergency Room Visit with Their Burned Infant
