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Bad year for fund managers: Active funds underperform index
Find out how well active fund managers really do. A critical analysis shows that the majority of funds were unable to beat the benchmark indices. A look behind the scenes of the financial market.
Bad year for fund managers: Active funds underperform index
Active fund managers once again struggled to outperform the market in 2023. A recently published study “S&P Indices Versus Active Funds (SPIVA) Europe Scorecard” shows that Germany-based fund managers performed worse with 87 percent for equity funds compared to the S&P Germany BMI. Over the last ten years the number was as high as 85 percent.
The majority of funds in Europe underperformed their respective benchmark indices across various equity and bond categories. Tim Edwards of S&P Dow Jones Indices emphasized that the index's outperforming is due to either luck or above-average skill, without any long-term evidence of this.
The numbers were particularly disappointing in Italy and France. 98 percent of fund managers based in Italy failed to outperform the S&P World Index, while in France it was 90 percent. In the UK and Switzerland, a small number of managers beat the index in the short term, but they did no better in the long term.
The growing market concentration is cited as the main reason for the poor performance of fund managers. The high weightings of large blue-chip companies in the index make them difficult to outperform. The research also shows that many funds in Europe have merged or folded over the past decade as they underperformed the index.