A new study by Australian asset consultant, Frontier Advisors, found global equity active managers turned in their worst index-relative performance in more than 20 years as a handful of stocks dominated markets.
Only 36 per cent of active international share managers in the Frontier sample beat the benchmark MSCI All Country World Index (MSCI ACWI) during 2024 with the final six months of the year proving particularly rough for stock-pickers.
Almost 40 per cent of active global equity shops outperformed in the first half of last year, falling to just 26 per cent in the following six-month period.
In aggregate, active international share funds returned a 24.8 per cent over 2024 but lagged the index by 4.6 per cent for the 12 months.
Brad Purkis, Frontier senior consultant, said in a release that the 2024 “benchmark performance was driven by a small group of stocks, which posed a challenge for active managers”.
“The two thirds of global active managers who did not hold Nvidia faced significant difficulty in outperforming the broader market, and that’s just one of that group of seven dominant companies,” Purkis said.
And the chip-factor proved decisive, too, for emerging markets managers where fund weightings of Taiwan Semiconductor Manufacturing Company (TSMC) stock – representing about 10 per cent of the index – drove performance.
“Emerging markets provided little relief for active managers,” Purkis said. “TSMC’s dominance meant that underweight positions were difficult to overcome for many managers.”
On average, actively managed emerging markets funds fell about 0.7 per cent short of the index last year.
Growth managers outperformed value in broader global equity markets over 2024, the Frontier analysis found, albeit only a “select group of ‘high growth’ managers” climbed above the benchmark.
However, quantitative international share strategies “stood out as a rare success story, benefiting from diversified portfolios and effective risk controls”, the release says.
The Melbourne-headquartered Frontier, which emerged from the Australian industry superannuation fund sector, has a presence in NZ as investment adviser to the $1 billion TECT charitable fund based in Tauranga.