Looking across the seven most popular sectors in the Lipper universe – UK, Asia, Japan, Europe, GEM and bond markets – the top performing active managers have produced higher returns than their respective benchmarks and the best performing passive funds over a 10-year period, the duo’s research revealed.
In the UK, for instance, the best performing active fund beat the index by a multiple of 3.1x.
The one exception was the US, where the best passive performers and best active performers were neck and neck, each yielding returns of 364.6%.
The multi-manager team’s findings pointed to a long-term pattern in which “active managers were significant outperformers”.
Burdett and Potter admitted that their F&C Lifestyle range, celebrating its tenth anniversary, has benefitted from active outperformance in EM, Asia, the UK and Europe.
However, on a year-by-year basis, the index has tended to beat the average manager, the pair noted.
But with the exponential growth of the passive marketplace, Burdett cautioned that investors need to be aware of the differential in performance.
“Over 10 years, the research showed there are large differences between the performances of index funds. For example, the difference between the best and worst UK passive fund ranges between 99.5% and 18.3%, due to choice of index benchmark, charges, dividend policy, gearing, currency and tracking methodology.”
That being said, the duo maintained a preference for an active/passive hybrid approach over the long term as the best means of navigating changing market conditions.
