MOST ACTIVELY MANAGED UK FUNDS HAVE FALLEN FASTER THAN THEIR RESPECTIVE MARKETS IN THE PAST YEAR
The usual trend whereby active managers outperform their benchmarks in a falling market has been broken by the totally unexpected nature of the fall in global markets, research from HSBC Asset Management shows.
The group, which looks into the active versus passive returns of global funds, noted that following the events in September, most markets fell and active managers underperformed.
Alison Savage, head of marketing and business development at the group, said: 'Over the past 12 months finding an active manager that has outperformed their benchmark has been easiest in the UK where the large number of income funds have dragged up the average as value stocks have outperformed.'
The percentage of non-specialist unit trusts that have beaten the total return performance of their respective market indices over the year to 28 September, on a bid-to-bid basis, is highest for UK income funds, with 96.7% outperforming. In fact, UK funds as a whole fared better than US, Europe and Japan portfolios, with 31.8% of UK Growth funds outperforming while only 24.1% of European funds, 28.6% of Japan portfolios and just 16.9% of US funds beat their market indices.
These figures are all down from earlier in the year when more than 50% of UK Growth funds outperformed, over the year to the end of June 2001. In the same time frame, 71.9% of Japan funds and 69.7% of European funds outperformed their relative indices.
Savage said: 'US, European and UK Growth funds have all seen outperformance figures fall following the events in the US. There is evidence that managers in these sectors were positioning funds for a recovery and so were investing in cyclical stocks. These stocks saw significant falls as the markets reassessed the prospects for the global economy.'
The US market appears the most efficient due to the low number of active fund managers which have beaten the index, Savage said. She added: 'Following a poor third quarter for US managers, the medium and long term performance figures have suffered. The rationale behind index funds is that if markets are efficient, active managers cannot outperform due to their higher costs. Given that a significant portion of US managers fail to beat their index, it seems the US market is still the most efficient.'
HSBC figures show that 16.9% of all US unit trusts beat the FTSE World USA index over the year to end of 28 September, on a bid-to-bid basis. The US unit trusts excludes small cap and index portfolios and the returns of the FTSE World USA index have been adjusted to reflect a 0.75% annual management charge. The number of funds that outperform the index, however, does rise over three years to 35% but then falls back once again over five years to just 21.8%, which beat the index.
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