BS from fund mgrs exposed yet again

In Financial competency on 11/02/2019 at 5:18 am

I’ll let the FT tell the tale

How did US stockpickers fare in 2018?

In a word: badly.

The performance of US stockpickers deteriorated in 2018 as just 38 per cent of actively managed equity funds outperformed their average passively managed peer over the 12 months to the end of December, according to the Morningstar, the data provider. That number was down from 46 per cent in 2017.

Supporters of active management have long argued that quantitative easing since the financial crisis and a decade of ultra-low interest rates have artificially suppressed stock market volatility.

Active fund managers kept saying their skills would shine once volatility returned to more normal levels. That theory was put to the test last year when more volatility buffeted Wall Street, leaving the S&P 500 delivering a minus 4.4 per cent return (including dividends), its weakest performance since 2008.

But the long-promised improvement for active managers failed to materialise.

Active fund managers who focus on “value” stocks — which trade at a low price relative to fundamentals, such as dividends, earnings or sales — had a particularly tough year, revealed the Morningstar data. Just 30.1 per cent of actively managed value funds that focus on large companies beat their passive peers in 2018. Success was even more elusive at the small end of the market where a lowly 15.9 per cent of value managers outperformed their average passively managed peers.

Chris Flood

Invest via low cost index funds. Buffett is a fan of these.

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