Active funds double returns of passives

In the chaotic sell-off of the global pandemic, and subsequent rebound, active managers outperformed their passive peers by some 8% over the past year*, according to research by FundCalibre.

The research shows that 70% of actively managed global equity funds outperformed their passive peers over the 12 months, returning an average 16.55% – almost twice the average passive return of 8.48%*.

Commenting on the findings, Darius McDermott, managing director of FundCalibre, said: “These results show that active managers really did their job in the volatility we saw in 2020. Their greater flexibility allowed them to take advantage in the extreme price moves in a way their passive counterparts simply couldn’t match.”

UK and US active managers also outperform

The global universe wasn’t the only area to see active management shine. 69% of actively managed UK equity funds beat passives over one year, outperforming by 6% on average*. While the UK equity market struggled more under the cloud of Brexit uncertainty, the average UK active fund returned -1.94% vs -8.02% for the average passive fund.

Even in the US, where the market is famously hard to outperform, 51% of actively managed funds outperformed their passive peers by an average 4% over one year (16.88% vs 12.90%)*.

Darius McDermott added: “What’s impressive is that the results were broad based. We all know that Baillie Gifford has delivered some incredible performance, but it wasn’t alone. 70% of global active funds outperformed.

“Are we also getting to the point where there is so much passive money in the market, active managers are finding it easier to generate outperformance? Possibly. The research also shows that actively managed funds in each of these three regions have outperformed passives over three, five and ten years too.”

Best performing Elite Rated funds over one year in each region

Global equity

FundReturns over one year*
Baillie Gifford Global Discovery89.36%
Ninety One Global Environment44.93%
T. Rowe Price Global Focused Growth Equity44.8%

UK equity

FundReturns over one year*
Marlborough UK Micro Cap Growth25.22%
MI Chelverton UK Equity Growth22.74%
TB Amati UK Smaller Companies18.25%

US equity

FundReturns over one year*
Baillie Gifford American121.55%
T. Rowe Price US Large Cap Growth Equity30.36%
AXA Framlington American Growth28.56%

 

*Data sourced from FE fundinfo, using constituents of the combined Investment Association UK All Companies, UK Equity Income and UK Smaller Companies sectors as well as the IA North America and IA Global sectors, divided into passive and active strategies. The average return of each was used to calculate the performance difference. Data is over one, three, five and ten years to 9 February 2021. The results do not take account of survivorship bias. Average means ‘mean’ in the cases above.

This article is provided for information only. The views of the author and any people quoted are their own and do not constitute financial advice. The content is not intended to be a personal recommendation to buy or sell any fund or trust, or to adopt a particular investment strategy. However, the knowledge that professional analysts have analysed a fund or trust in depth before assigning them a rating can be a valuable additional filter for anyone looking to make their own decisions. Past performance is not a reliable guide to future returns. Market and exchange-rate movements may cause the value of investments to go down as well as up. Yields will fluctuate and so income from investments is variable and not guaranteed. You may not get back the amount originally invested. Tax treatment depends of your individual circumstances and may be subject to change in the future. If you are unsure about the suitability of any investment you should seek professional advice. Whilst FundCalibre provides product information, guidance and fund research we cannot know which of these products or funds, if any, are suitable for your particular circumstances and must leave that judgement to you. Before you make any investment decision, make sure you’re comfortable and fully understand the risks. Further information can be found on Elite Rated funds by simply clicking on the name highlighted in the article.