Active Managers Struggle to Beat Benchmarks

By Andrew Rickard | August 05 2014 07:25AM

Active money managers had a difficult time in the second quarter of 2014, and most failed to beat the returns of their respective benchmark indices.Russell Investments’ most recent Active Manager Report, which follows the performance of about 150 institutional money manager products, reveals that the median active manager return in the second quarter (gross of fees) was 6.2%, lagging behind the S&P/TSX Composite Index return of 6.4%. The report notes that growth managers performed better than defensive managers during this period, with 50% of them earning returns that were higher than the benchmark compared to just 41% of large cap managers, 34% of value managers, and 27% of dividend-focused managers.

"This was the first time in a year that growth managers have fared better than value and dividend managers," comments Kathleen Wylie, head of Canadian equity research at Russell Investments. "Their style was largely out of favour throughout most of the financial crisis with growth managers lagging the more defensive styles in all but five quarters since the third quarter of 2008. We know that styles come in and out of favour and that the performance differences in some periods can be quite extreme."