Tuesday, 5 February 2019

Outperformance by active fund managers plummets in ...

... 2018. So, uh ... last year, dear reader(s). 'Maybe things are better now, boss.' Ha! Maybe, Voice. You're such an optimist. Maybe things are better. I wouldn't count on it though.

Far fewer active fund managers outperformed their benchmarks in 2018, according to an analysis of 15 key equity and bond fund segments. In fact, under a quarter of active equity funds beat benchmarks in 2018 and just 16% of bond funds outperformed.

You see? 'Where's this from?' Scope Analysis sent it to me. 'Oh.' You know, that German firm. 'Yeah.' Here's more -

Scope's study, which covered nearly 2,000 equity funds (UCITS) authorized for distributing in Germany, found that the proportion that outperformed their benchmark fell year-over-year by over half from 53% in 2017 to 24% last year. All eight equity segments saw their ratios worsen from 2017 to 2018.

Oh, we've had this before. I mean, "authorized for distributing in Germany". But I think they're talking about all equity funds worldwide. At least, I hope they are. 'Boss, they know you're the world's foremost financial shaman. Don't worry about it.' Okay, okay. I won't worry about it.

'Equity Germany' suffered the largest decline; the ratio slumped y-on-y from 87% to 25%. 'Equity Japan' also fell sharply, from 74% to 15%, pushing this segment to the lowest ratio among equity categories. Only one in seven of the 124 active Japan funds outperformed the MSCI Japan index in 2018. By contrast, 'Equity Asia Pacific ex. Japan' achieved the highest ratio, with 37% of the 59 active funds beating the index.

Well, that's all right, ain't it? They are concerned about Germany, obviously - but they mentioned Japan as well. 'Look! Equity World!' Where? 'Here -'

The 'Equity World' segment, the biggest in the study with over 700 funds, also suffered a sharp fall in their outperformance ratio: only around 22% beat the MSCI World index in 2018, down from 56% in the previous year.

Global equity funds were affected by the discrepancy between European and American equities, which was extreme by historical standards. Many equity funds were overweight Europe and underweight the US in 2018, which had a negative impact on performance. Moreover, numerous fund managers in Europe and Germany had high weights on cyclical export firms and were hit when the trade war escalated. Many fund managers were similarly overweight German small and mid-caps, which had a disproportionately strong correction relative to blue chips, especially in the second half of 2018.

Oh, there's nothing to worry about dear reader(s). It is worldwide. So, wherever you are in the world, my lovely kook(s), you should find something of interest here. 'Unless they're not interested in finance.' What?! 'They might be here for the music, Mikey.' Er, no music today, Voice. Just finance. And fitness. 'Fitness?!' You'll see. / Anyway, emerging markets ...

For bond funds, the long-standing boom in emerging markets came to an end last year. Many fund managers were overweight EM, partly lured by positive spreads, and were caught on the wrong foot as a result. Additionally, high exposure to Italian bonds contributed to under-performance as Italian bonds came under severe pressure over the budget dispute with the EU. Even funds that counted on a narrowing of the record-high gap between US and German government bond yields saw losses.

And, uh ... ENDS, as they say in the business. 'Did they say it?' No. I did. 'Oh, I thought they didn't, because I was taking a peek at the email and I couldn't see any ENDS.' So? 'So nothing. I'm just saying, that's all.' What's your problem, Voice?! If they don't end with ENDS, then sometimes I like to add it. 'Okay.' I don't understand your problem. 'I haven't got a problem, boss.' Well, okay then. Let's move on!


Anything else? Not a lot, no. Well, fitness, yes. I've been thinking about how much I enjoy walking to Richmond and back. Eight miles. 'Eight miles high, boss?' Well, yeah, man, it makes me feel good. REAL GOOD. Mentally as well as physically. I might do it once a week when the weather gets better. It's not healthy staying indoors all the time, you dig?

What else? 'Brexit!' No, no. 'Yes, yes! Come on!' Okay. Chris Grayling says it will be the EU's fault if there's No Deal. That's not true, of course, but does it matter? I mean, if you lose your job and your home, and your children go hungry, will it be a great consolation to you, dear reader(s), that the EU is to blame? 'Ha!' And people wonder why I like to live in a dream world in my blog ...

Later(s), crocodile(s)!