Companies selling passive investment products already have the momentum on their side. The active fund managers by contrast have been dealt another blow by a study that leaves no question unanswered.
The «Financial Times» (story behind paywall) has deemed the numbers «damning». And that’s what they are: Dow Jones recently released a study about the long-term performance of actively managed investment funds and came to a conclusion that didn’t make for nice reading.
According to Dow Jones, 99 percent of U.S. equity funds sold in Europe over the past ten years failed to beat the market. Global equity funds did marginally better, with 98 percent doing worse than the benchmark since 2006. The emerging markets funds saw three out of 100 doing better than their underlying indexes.
Belying the Purpose
Of course, the achievement of a higher yield compared with the benchmark is why people invest in actively managed products. Dow Jones, which ordered the survey, called the results alarming.
The study provides firms selling passive products, for instance exchange traded funds, or ETFs, with a massive boost. Vanguard, the U.S. ETF specialist, for instance argued that active management didn’t provide an additional benefit. It can feel vindicated.
Toxic Mix for Battered Industry
The exodus of customers from active into passive investments is gathering pace. Add to that a fickle stock exchange and eroding margins and you get a toxic mix, badly affecting the financial wellbeing of fund managers.
Even the industry heavyweights are forced to reconsider their future. Janus Capital of the U.S. and U.K.-based Henderson recently merged and Italy’s Unicredit has put its fund manager Pioneer up for sale.
«Get Better – or Cheaper»
In Switzerland, companies such as GAM are also feeling the pinch.
The fund management industry – at least the active segment – has to reconsider. Jon Ingram, European equity specialist at J.P. Morgan Asset Management recently told finews.ch: «The products need to get better – or cheaper.»
