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Actively managed ETF launches tick up even during period of underperformance

Observations According to the just released S&P Dow Jones Indices SPIVA report¹ that measures the performance of actively managed funds against their relevant S&P index benchmarks, 49% of actively managed large-cap domestic equity fund managers were able to outperform their corresponding benchmarks during the first six months of 2022. Or, put another way, 51% underperformed. …

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The Bottom Line:  Even as the majority of US and international equity managers continue to underperform, new launches of actively managed sustainable ETFs tick up.

Observations

  • According to the just released S&P Dow Jones Indices SPIVA report¹ that measures the performance of actively managed funds against their relevant S&P index benchmarks, 49% of actively managed large-cap domestic equity fund managers were able to outperform their corresponding benchmarks during the first six months of 2022. Or, put another way, 51% underperformed.  This was a period during which the S&P 500 gave up 19.96% and fixed income, as measured by the Bloomberg US Aggregate Bond Index, was down 13.91%.  
  • This represents a significant minority of active managers, and it puts actively managed large-cap US equity funds on track for their best (i.e., lowest) underperformance rate since 2009. Underperformance across US market capitalization ranges was even higher, with 54% of mid-cap and 63% of small-cap funds underperformed the S&P MidCap 400 and the S&P SmallCap 600, respectively.
  • As for international equities, a majority of actively managed funds underperformed in every category.  On the other hand, 93% of Core Plus Bond funds and 59% of actively managed high-yield US funds outperformed the iBoxx $ Liquid Investment Grade Index and iBoxx $ Liquid High Yield Index.  This was not the case, however, for other fixed income categories.  
  • There is no reason to believe that sustainable funds would perform any differently, yet interestingly, the latest interval of underperformance by US equity fund managers coincides with a pickup in the launch of actively managed sustainable ETFs.  As of August 31, 2022, there are a total of 74 actively managed ETFs with total net assets in the amount of $4.8 billion.  The segment is dominated by equity funds that account for 74% of funds by number and 71% of assets under management.  
  • During the eight month-interval since the start of the year, actively managed sustainable ETFs expanded by 13 ETFs, or 21.3%, while passively managed sustainable ETFs expanded by 10, or an increase of 6.5%.

¹ S&P Indices Versus Active (SPIVA) measures the performance of actively managed funds against their relevant S&P index benchmarks.

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