tmmonline.nz  |   landlords.co.nz        About Good Returns  |  Advertise  |  Contact Us  |  Terms & Conditions  |  RSS Feeds

NZ's Financial Adviser News Centre

GR Logo
Last Article Uploaded: Tuesday, March 19th, 6:25PM

News

rss
Latest Headlines

Active management 'not very well'

Active management is alive but “possibly not very well”, a Russell Investments New Zealand Investment Forum session has been told.

Sunday, June 28th 2020, 9:45PM 1 Comment

Leola Ross

The conference is being held online this year, as a series of webinars.

One considering the strength of asset management was conducted by Leola Ross, Russell Investments strategy research director.

She outlined research measuring the performance of sample managers who had been defined as having demonstrated skill.

It showed that the active managers outperformed in the period of 1999 to 2014, returning a median 4.73% in outperformance between 1999 and 2002. But a “performance pandemic” in 2015 to 2018 saw performance drop away markedly. “Skill was not enough,” she said.

There were a few reasons for that, she said. Mega-cap stocks outperformed dramatically, both in developed economies and emerging markets. “That was really disruptive. What a lot of active managers are doing is more in the mid and small-cap area.”

Many active portfolios were also underweight to the US, she said, because there were so many active managers there that it was hard to get alpha. But the US outperformed “massively” during this period.

Emerging markets as a region underperformed, she said, which hit managers who retained an emerging markets exposure in the hopes of boosting their return.

“Typical sector bets might have worked against them,” she said. “It’s been a tough time to be extra beta when it was the wrong beta.”

Many tilts did not pay off, she said. “They were too much to come back from on a stock selection basis.”

But she said there were signs of improvement between 2019 and 2020. While the range of active manager returns “blew out”, there was significant upside for skilled and lucky managers. In the period of 2019 through to the end of March, performance ranged from 3% below the benchmark to more than 5% above for the top quartile.

“There was material downside if you were wrong but here were managers who did well if they were skillful and lucky … managers are working hard to find opportunities and some of them are finding it.

“Active management is not dead, whether or not it’s fully recovered – that's a tough one.”

She said 2015 to 2018 had been a period of excess expectations. “Let’s manage our expectations. Another wise thing to do is be careful about unintended exposures. If you believe something is going to pay off, take that bet but if you think it’s just a bet potentially unrewarded be cautious.”

 

Tags: Active v Passive funds management investment Russell Investments

« Final disclosure regulations welcomedMann on a mission to diversify financial advice »

Special Offers

Comments from our readers

On 29 June 2020 at 4:23 pm John Milner said:
It seems the active/passive argument continues, while in reality neither side gets it right all of the time. Even sitting in the middle as I have done with tilts have been no better off at times. As some would say about God himself, the markets can certainly move in a mysterious way!

Sign In to add your comment

 

print

Printable version  

print

Email to a friend
News Bites
Latest Comments
Subscribe Now

Weekly Wrap

Previous News
Most Commented On
Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.24 6.79 6.65
ANZ 8.64 7.84 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.24 6.79 6.65
ASB Bank 8.64 7.24 6.79 6.65
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.24 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.84 7.39 7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 7.04 - -
Co-operative Bank - Owner Occ 8.40 7.24 ▼6.79 ▼6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.74 ▼7.29 ▼7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.69 6.45 6.19
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 ▼6.75 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.79 ▼7.39 ▼7.25
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 8.25 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 7.25 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.75 7.35 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 8.30 7.89 7.69
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 9.30 8.89 8.69
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.84 7.45 7.25
SBS Bank Special - 7.24 6.85 6.65
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.74 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 8.04 7.55 7.45
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 7.24 6.75 6.65
Unity 8.64 6.99 ▼6.79 -
Unity First Home Buyer special - - 6.45 -
Wairarapa Building Society 8.60 7.15 6.85 -
Westpac 8.64 7.89 7.49 7.25
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.29 6.89 6.65
Median 8.64 7.29 7.32 6.65

Last updated: 14 March 2024 9:32am

About Us  |  Advertise  |  Contact Us  |  Terms & Conditions  |  Privacy Policy  |  RSS Feeds  |  Letters  |  Archive  |  Toolbox  |  Disclaimer
 
Site by Web Developer and eyelovedesign.com