Where fund managers got it wrong in 2012

Yesterday was our Fund Awards and very well done to all the winners; though as the pendulum swings back towards a stockpicker’s market, it’s clear that managers can struggle as much as anyone to get the macro calls right.

Where fund managers got it wrong in 2012


Portfolio Adviser’s own Manager Sentiment Survey – a bespoke database of monthly fund manager opinions from leading groups compiled in conjunction with Skandia – has brought some interesting results.

By potting managers’ views on how they believed markets would behave last year against actual Morningstar index data, we can see that they were largely overoptimistic about equity performance.

UK not OK

The domestic market is a good example of this. Given its breadth, from multi-national oil & gas giants down to struggling truedomestic-focused retailers, it is understandable why it is so hard to predict the fate of the FTSE.

Fund managers were largely buoyant with their predictions for the FTSE 100, with 11 out of 12 months in positive territory. As it turned out, the index remained relatively unruffled in the first half of the year, took a tumble in the summer and then rallied strongly in Q4 as troubles in the eurozone receded.

Interestingly, GDP data followed an opposite trend – it fell by a worse-than-expected 0.3% in Q4, following a 0.9% rise in Q3. This has been attributed to lower output in the production industries, with manufacturing falling 1.5% and mining and quarrying down 10.2%.
The same goes for other developed markets – for example, predictions for European equity were at their least optimistic for September through to December last year, exactly when the market rallied the most.

Decent returns

Of course, our methodology is not an exact science and we’re not about to embark on a witch hunt to name exactly who got it wrong. Still, as the winners from yesterday prove, there were plenty of managers who did make investors decent returns last year in tough conditions, and it is that ability to add alpha at a micro stockpicking level which makes them worth buying over passives.

A full run through of our Manager Sentiment Survey features in the February edition of Portfolio Adviser, out now.



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