A US Federal Reserve rate hike and market volatility provided a difficult backdrop for active managers with only six of the 1,108 funds analysed in the 12 main IA sectors consistently delivering top-quartile returns over three consecutive 12-month periods, to the end of Q4 2018, the Fundwatch survey found.
The funds represent just 0.54% of the fund universe and are considerably below the historic range of 2% to 5%.
Against this backdrop, the IA UK Index Linked Gilt sector shone as the best performer over Q4, gaining 2%, while the IA North American Smaller Companies was the laggard of the 37 sectors, falling 17.7%.
The £205m Investec Global Gold fund run by George Cheveley was the strongest performer in the IA universe. With a skew to gold mining, the fund benefited from both market and stock specific moves, BMO Gam said.
Target absolute return fails
In contrast, the IA Targeted Absolute Return sector fell 2.3% in the quarter. The 12-month return for the sector was -2.7%.
Kelly Prior (pictured), investment manager at BMO Gam, said: “Our analysis showed that the last quarter of 2018 was challenging for active management as the vicious rotation in markets and asset prices created a torrid investment environment.
“With a massive risk off rush in December, profit taking in the growth darlings was replaced by the need for safety and the perceived security of Government bonds and staple equity sectors.
“With the ECB now firmly stating their withdrawal from supporting the market at a time when the US Federal Reserve is doing the same, natural market forces should come into play, and with that we expect a more fruitful time for active management in 2019.”