Humans strike back in AJ Bell’s ‘Manager versus Machine’

Things have picked up for active managers after a ‘bleak 2022’ 

Laith Khalaf
Laith Khalaf


Actively managed funds have seen a notable uptick in relative performance versus computer-run trackers, according to AJ Bell. 

The investment platform’s Manager versus Machine report for the first half of 2023 found things have improved markedly for active managers after a ‘bleak 2022’. 

The firm found 44% of active equity funds outperformed a tracker in the first half of 2023, up sharply from 27% in 2022. 

Over ten years, however, there has not been an improvement on the human side of the contest, with only 38% of active funds having outperformed a relevant tracker fund.

In individual sector terms, AJ Bell found ever-popular global funds continued to be laggards, with only 33% of active offering beating the trackers in the first half of 2023. Over ten years, the figure was just 22%.

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Turning to AJ Bell’s home market, the firm found UK active managers did considerably better than their global focused counterparts with a tick under half (49%) beating a relevant tracker during the six months, up sharply from 13%, and 50% managing to do so over ten years. 

Another notable finding at the asset class level was emerging markets managers being the stars on the human side. More than three in four (77%) managers in this sector have beaten passive machines so far in 2023, and 53% have done so over ten years.

Here is the full breakdown by asset class:

Percentage of active funds outperforming a passive alternative

H1 20235 years10 years2022
Asia Pacific Ex Japan51%26%39%12%
Europe Ex UK35%29%46%43%
Global Emerging Markets77%56%53%21%
North America43%15%22%40%

Sources: AJ Bell, Morningstar. Total return in GBP to 30 June 2023, 2022 data to 30 November 2022.

Laith Khalaf, head of investment analysis at AJ Bell, commented: “Active equity managers fought back in the first half of this year after a dismal 2022 when just over a quarter managed to scrape past a tracker fund. To be honest, things couldn’t have got much worse without testing the laws of statistics. 44% of active managers outperformed a tracker in the first six months of 2023, a substantial improvement to say the least.

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“The active versus passive battle is increasingly being won by tracker funds, if the investment industry’s fund flows are anything to go by,” Khalaf continued. “Our longer-term analysis shines a light on one of the factors driving this trend: only 38% of active equity funds have outperformed a passive comparator over the last ten years, which isn’t exactly a great sales pitch for active funds.

“A lot of this can be put down to a poor showing from global funds, where just over one in five have beaten the passive machines over the last decade. However, there are long-running market trends which provide some mitigation for active managers, in particular the dominance of US tech stocks.”

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