Bonds bright spot for active managers in 24

Standard and Poors annual report comparing how active managers have performed against passive ones has some good news for local managers.

Wednesday, March 19th 2025, 8:12AM

The SPIVA report for calendar 2024 says it was another challenging year for active managers across developed equity markets.

“A large majority of global equity funds domiciled in New Zealand lagged the S&P World Index, with 83% of global equity funds and 71% of global equity (hedged) funds underperforming.”

However, New Zealand equity funds fared relatively better, with a 58% underperformance rate, while the New Zealand bond category was a bright spot, with 80% of funds outperforming.

S&P DJI head of index investment strategy, Sue Lee. said fixed income markets provided a favourable environment for active managers.

“Credit spreads trended lower throughout 2024, while the term structure remained inverted for a significant portion of the year, allowing an additional pickup in yields with reduced duration risk.”

Overall, she said bond managers had favourable conditions for style bias in duration and credit.

Many active managers in the bond category performed well. Only 20% of funds underperformed, generating an asset-weighted average return of 6.3% compared to a 5.3% return for the S&P/NZX composite investment grade bond Index in 2024.

“However, more consistent performance will be required to alter the longer-term statistics, as 81% of funds lagged over a 15-year period.”

On the equities side of things the S&P/NZX 50 Index gained 11.4% in 2024 (12.2% with imputation credit), while 58% of actively managed New Zealand equity funds underperformed it.

“Some did better, and the funds in this category achieved an asset-weighted average return of 14.0%. Over the 15-year horizon, 86% of funds underperformed.”

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