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

UK equity

US equity

*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.