Most active equity funds fail to outperform their benchmarks in 2023
The overall average relative performance of all equity funds compared to their benchmarks was -2.4% in 2023.
Of the 13,938 actively managed funds globally, including conventional and ESG strategies, just 4,741 managed to outperform their respective indices, representing around 34% of such funds.
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The overall average relative performance of all equity funds compared to their benchmarks was -2.4%, the firm found.
However, LSEG Lipper noted that around two-thirds of the average underperformance «can be attributed to fees and expenses».
ESG-related funds performed worse than conventional strategies over 2023, delivering an underperformance of -1.9%, compared to their conventional peers' average -1.1% loss.
Around 37% of conventional funds outperformed their benchmarks, compared with 28.6% of ESG-related funds.
Yet Detlef Glow, head of EMEA research at LSEG Lipper, noted that the greater underperformance of ESG funds was partly due to the fact that several use conventional benchmarks to «showcase their ability to beat the respective market».
Such an approach was adopted following criticism regarding the potential of underperformance for ESG funds caused by their exclusion criteria, he explained.
As a result, Glow warned that while comparisons should be made due to similarities in benchmarks, there is a risk of making false assumptions, since some market environments may favour companies, sector or industries that are ineligible for ESG funds.
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He added: «These results may indicate that the market environment over the course of 2023 was in favour of conventional funds, since companies
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