Tatton Teaser
Posted 16 May 2024
A big debate for investors, active vs passive investing. Are active equity funds outperforming passive equity funds? Return data from active and passive managers suggests that it depends on the region. Over the last 12 months, and within most of the major asset classes, less than 50% of the active equity strategies have managed to outperform their passive peers. However, in areas like Europe ex UK, UK and US more than a third (more precisely around 40%) of active funds have had a stronger run over the year against passives. Notably, close to 60% of active Emerging Markets funds have also outperformed the average 1 year returns of their tracker counterparts.
Looking at this from a longer term perspective, particularly on a three year and five year basis the same pattern continues, which is partly justified by higher fees taking away from returns. Clear outperformers have been US active managers, with approximately 50% beating passive competitors over three years, while over five years, around 50% of Europe ex UK active funds and 40% of UK and US funds have managed to outrun the average returns of their tracker peers.
Unsurprisingly, fund flows have been strong for passive strategies surpassing those of active strategies in most regions like UK, Europe and the US.
Thank you Dimitra Liga for the analysis.
