Financial research and data firm, Refinitiv, has added to the already well-stacked pile of active-vs-passive literature with a new study showing just 20 per cent of actively managed global equity funds outperformed over the 10 years to the end of 2022.
According to the Refinitiv analysis, only 203 of the 1,099 international equity funds captured in the sample beat their respective benchmarks over the 10-year period.
The research also measured the global equity fund returns over multiple one-, three- and five-year periods within the same 10-year stretch with the number of managers outperforming in every one of the statistical time-chunks rising as the term increased.
Only a single fund outperformed in every one of the 10 annual periods while 20 managed the feat over the three-year terms and 58 “were able to beat their fund manager benchmark over every five-year period”, the study says.
But on average 379 funds logged above-index returns in any one year compared to 299 for the three-year periods.
“In more detail, 262 funds were able to beat their fund manager benchmark on average over the five-year periods… while the actual number of funds varies between 327 and 194 funds. That said, it is surprising that the lowest number of funds beating their fund manager benchmarks has been found over a five-year period (194),” the Refinitiv report says.
“It is also surprising that on average less [sic] funds show an average outperformance over the five-year period (262) than over the three-year period (299).”
Authored by Detlef Glow, head of Refinitiv Lipper EMEA research, the study concludes that active management is a difficult game.
“… it is very hard for fund selectors and especially retail investors to find a global equity fund which will be able to beat its fund manager benchmark over various time periods.
“Nevertheless, there were 203 actively managed mutual funds and ETFs which have beaten their respective benchmarks over the 10-year period… investors who have chosen an actively managed mutual fund for their portfolio might need some patience…”
The proportion of outperforming funds may have been overstated given Refinitiv screened-out strategies that closed during the 10-year period.
“… it seems to be a valid assumption to state that successful funds won’t get closed by fund promoters,” the report says.
Now owned by the London Stock Exchange Group (LSE), Refinitiv is a conglomerate of financial information and data companies that emerged out of Thomson Reuters. LSE is also the parent company of index provider, FTSE Russell.