Morningstar: Over 60% of active bond managers outperform passive rivals
Despite the short-term rosy picture for active managers, Morningstar said over the long term, success rates 'remain solidly in favour of passive funds'.
In its bi-annual European Active/Passive Barometer, the firm found that in the 24 categories analysed, 62.7% of active bond managers outperformed their passive counterparts over the 12-month period.
This marked an increase from 55.5% at the end of 2022 and 46.2% the year before.
Morningstar said the increase was largely due to bond markets regaining strength in the first half of 2023, with rising yields driving demand for developed government and investment-grade corporate issuers.
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On the European equity side, of the 43 categories analysed, around 36.6% of active managers outperformed passives, despite the lower proportion when compared to bond managers. This marks an increase from 33.6% at the end of 2022 and 30.4% in 2021.
Despite the short-term rosy picture for active managers, Morningstar said success rates «remain solidly in favour of passive funds» over the long-term.
On average, it found that just 17.1% of active equity managers and 23.1% of active bond managers overperformed their passive alternatives in the ten years to the end of June 2023.
This is because passive funds tend to survive longer, according to the company's findings. More specifically, in the ten years to June 2023, 53.7% of active equity funds survived on average, compared with 63% of index-tracking strategies.
A similar trend was also true for fixed income, where 52% of active funds survived versus 61% of passives.
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