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Active management US outperformance ‘at lowest level in a decade’

Cherry Reynard
Written By:
Cherry Reynard

Fewer than 20 per cent of actively managed US large cap equity funds assessed by Bank of America Merrill Lynch (BofA ML) have outperformed their benchmarks so far this year, the lowest level in a decade.

Latest figures from the investment bank show last month’s market volatility dragged down average returns further after what had already been a poor 2014.

Overweights to the likes of energy stocks, which suffered in October as the oil price continued to slide, meant that just 18 per cent of active US managers were outperforming the Russell 1000 large cap index by the end of the month.

That compares with 44 per cent of funds outperforming the index last year, according to BofA ML.

Analyst Savita Subramanian pointed to large-cap funds’ bias towards the smaller end of their market as being to blame, saying the biggest US stocks have outperformed “by a pretty large margin” in 2014.

Growth funds provide one small ray of sunshine: 55 per cent have outperformed the Russell 1000 Growth index year-to-date, the average fund doing so by 6bps.

But poor returns for core and value funds mean the average US active fund is two percentage points behind the Russell 1000’s 9.6 per cent gain so far this year, BofA ML said.