According to the latest report from the research firm titled ‘Beating the Benchmark’, an average of 42.1% of equity funds domiciled in Europe outperformed the benchmark in one-year rolling periods from 31 December 1991 to 31 December 2011.
Once this is extended to three-year rolling period the average drops slightly to 41.4%, and over 10-year rolling periods it falls again to 39.7%.
But a more notable disparity can be seen between funds investing in different regions.
For example, an average of 54.4% of active APac ex-Japan funds have outperformed the benchmark over 10-year rolling periods from 1991 to 2011, while only an average of 20.8% of North America funds outperformed in the same timeframes.
Using the same criteria 47.7% of UK equity funds beat the benchmark, compared to 24.6% of GEM funds and 27% of equity funds invested in Europe.
A previous report from Portfolio Adviser highlighted the divergence in added value active managers have in different asset classes, read it here.
‘Diverging trends’
Ed Moisson, head of UK and cross-border research at Lipper, said: "On the equity side, while funds investing in Asia and the UK maintain or improve on the proportion of funds outperforming as the time periods lengthen, the opposite is the case for the four other classifications assessed.
"These two diverging trends mean that for 10-year periods 20.8% of North American equity funds outperformed their benchmarks on average, while the equivalent proportion for APac ex-Japan fund is 54.4%."
Bond fund managers also find it harder to outperform the benchmark, compared to equity managers, with only 17.4% on average achieving the accolade in 10-year periods from 1991 to 2011.
Fixed income funds investing in euro-denominated and dollar-denominated bonds particularly struggled over longer-term timeframes, with an average of only 6.3% and 6.4% respectively outperforming the benchmark.
"For bond funds one can clearly see that for emerging market and global products for 1- and 3-year rolling periods the proportion of funds outperforming is fairly similar to that for equity funds," said Moisson, "But for euro-denominated and US dollar-denominated bond funds, the proportion of funds is not only smaller than equities for one-year returns, but it then declines as the periods assessed are lengthened."
In which asset classes do you think active managers add value? In which parts of your clients’ portfolios do you use passive investing, if any? Let us know below.
