Less than 40% of active equity managers beat average passive alternative in 2023

investmentweek.co.uk:

Laith Khalaf, head of investment analysis at AJ Bell, said the performance of active funds in the global sector against a passive comparator has been “particularly feeble”, with just a quarter outperforming. This falls to 22% over ten years.

Although only 36% of managers beat their average passive alternatives, this was an improvement when compared to 2022, when only 27% of active equity funds managed the achievement, AJ Bell's latest Manager versus Machine report has found.

Investors are demonstrating their disquiet with redemptions — a total of £9bn has been withdrawn from active open-ended funds by retail investors over the last five years. 

During the same time period, a net £75bn has flowed into passive strategies, based on AJ Bell analysis of Investment Association data. 

AJ Bell: Active equity funds gain ground on trackers in first half of 2023

Laith Khalaf, head of investment analysis at AJ Bell, said the performance of active funds in the global sector against a passive comparator has been «particularly feeble», with just a quarter outperforming. This falls to 22% over ten years.

«This is the most popular sector with UK retail investors, and so weak performance here has particularly widespread repercussions,» he added.

While global markets have been strong, this has shielded some of active fund managers' blushes. Over the last ten years, Khalaf said it has been significantly better to be invested in a bottom quartile global fund than a top quartile UK fund (107.9% versus 69.7%).

In the battle between fund manager and machine-led passives, a year is usually considered too short a time frame to judge an investment, but the longer term figures are no better.

«Over ten years just 32% of active equity managers have