Active fund managers "no better than a coin toss", says research

Active fund managers have improved their performance over the last year – but the odds of picking a successful manager are still "no better than a coin toss", according to asset management research firm Scope Analysis.

Just over half of active equities funds, in which managers proactively pick stocks rather than tracking indices, managed to outperform their benchmark in 2017, up from just 23 per cent a year prior. Meanwhile bond fund outperformers rose from 33 per cent to 50 per cent.

The research, which examines more than 3,000 funds registered to be sold within the European Union, again opens the debate on whether active funds – which are generally more expensive than their passive cousins – are worth investors' money.

Read more: Baillie Gifford lowers active management fees after watchdog places pressure on the industry

"Even though the outperformance ratio of many of the active peer groups in the Scope study significantly increased relative to 2016, the extent to which they beat their benchmarks in 2017 could be better," said Scope's report.

The popularity of passive funds has been on the rise in recent years, though some asset managers who have traditionally offered both strategies, such as 7IM, have turned back to active management in preparation for slowing growth in indices.

According to Scope, equities funds focused on Germany produced the most impressive result of 2017 with seven out of eight exceeding the benchmark. In 2016, just 15 per cent of the funds managed this.

On the other hand, only a third of active funds focused on North American equities outperformed their respective benchmark, the MSCI USA Standard Core.

Read more: As ETFs become ever more popular, where is the active v passive debate now?

Full story: Active fund managers "no better than a coin toss", says research: City A.M.

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