Most fund managers active in the United States have failed to beat the market over the past year, according to another disheartening report on a sector that often claims it will grow during times of volatility.
Across the majority of US equity fund categories, the average active manager has underperformed the benchmark, according to the latest semi-annual report on fund manager performance from S&P Global.
US fixed income managers also faced volatile market conditions. The majority of bond funds were unable to track their benchmarks in the year ending June 30, the report showed, citing the difficulties posed by the trade war between the United States and China and a global pandemic.
“It was a lot for active managers to navigate and most were not up to the task,” the report’s authors wrote.
The semi-annual report, known as the S&P Indices Versus Active Dashboard, or Spiva, is published by S&P Dow Jones Indices, a division of S&P Global.
“In 11 of the 18 national equity fund categories, the majority of funds continued to underperform their benchmarks,” said S&P Global.
Overall, 67% of actively managed U.S. mutual funds that invest in domestic stocks have been beaten by their benchmarks, when their returns are calculated net of fees. But there were positive results in some categories: 56 percent of funds focused on mid-caps and 53 percent of funds invested in small-caps outperformed their benchmarks over the one-year period.
The latest performance figures reinforce a dark period for active managers over more than a decade, marked by the steady rise of passive strategies that track an index and charge much less in terms of fees.
Bank of America pointed out this month that passive strategies account for “46 percent of all U.S.-domiciled fund assets” and that this figure rose to about one-fifth in 2009.
Over the past decade, “growth and value funds have underperformed their benchmarks,” said S&P Global.
Active managers are generally considered to have a better chance of trading volatile markets, but periods characterized by such trading conditions in recent years have not been a catalyst for better performance. U.S. equity volatility measures have remained well above average this year and despite new highs in the S&P 500 over the summer.
