Active fund managers put to the test: Index beats them again

Active fund managers put to the test: Index beats them again

Beating the market once again proved to be a major challenge for fund managers in 2023. According to the “S&P Indices Versus Active Funds (SPIVA) Europe Scorecard” study, 87 percent of actively managed equity funds in Germany performed worse than the S&P Germany BMI benchmark index. This suggests that the majority of fund managers have struggled to outperform the index over the past decade.

In Europe, the analysis showed that the majority of funds on offer performed worse than their respective benchmark indices across all equity and bond categories. Tim Edwards, head of index investment strategy at S&P Dow Jones Indices, commented that while there are a few fund managers who can outperform their benchmark indices in the short term, few can do so in the long term. This leads to the statement that ultimately it would be just as good to flip a coin to achieve success.

Actively managed global equity funds performed particularly poorly in Italy, where 98 percent of fund managers failed to beat the benchmark index. In Germany the market has become more concentrated, making it more difficult for active fund managers to find promising companies outside of the heavily weighted blue chips. In Great Britain and Switzerland, individual fund managers were able to achieve better results in the short term, but in the long term most funds also performed worse than their benchmark indices.

The SPIVA study also highlights that almost half of actively managed equity funds in Europe have merged or been discontinued in the last ten years. This was mainly due to the poor performance of the fund managers compared to the index. The study concludes that despite favorable market conditions, a positive total return was relatively easy to achieve. However, the high number of funds being discontinued suggests that many fund managers continue to struggle to achieve long-term success.