This has not been a good year for the financial markets as both bonds and equities made the place smelly. But it’s been a slightly less horrid year than usual for stockpickers.
S&P Global’s mid-year SPIVA scorecard of active US equity fund performance versus their benchmark was released today, and the big headline is that only 51 percent of large-cap funds underperformed the S&P 500.
That comes after a full 85 percent of them underperformed the benchmark over the past year, putting them on track for the least bad year of underperformance since 2009.
Funds focused on smaller stocks fared a little worse. About 54 percent of mid-cap and 63 percent of small-cap funds underperformed their benchmarks over the first six months of the year.
Value managers have done well, while growth managers have endured a terrible year in which 78 percent failed to beat their rate-hike indices. As S&P Global said in its report:
Market downturns seem to provide ample hunting grounds for active managers, but in the first half of 2022, the cross-sectional relationship between market performance and active fund relative returns reminds us that there were just as many opportunities for embarrassment.
For a more detailed breakdown:
So, will this performance boost help turn the tide of active management?
no
As the saying goes, investors can’t eat relative performance. It doesn’t help much to know that, for once, the average active US equity manager has performed just a little less badly than its benchmarks, especially when managers often market themselves as being able to limit losses in bear markets.
Most importantly, the longer-term trend remains bleaker than bleak. As you can see from the table above, only 8.2 percent of US equity funds have managed to outperform their indices over the past decade.
Just look at the share prices of active managers like T Rowe Price, Invesco and Franklin Resources to see what the market itself thinks going forward.
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