London.
If I had a pound for every time someone told me that UK fund managers are a special case, I’d be rich — even at recent, post-Brexit exchange rates.
OK, active funds are being trounced across the pond, the argument goes, but here in good old Blighty, and indeed in other parts of the world, there’s still plenty of alpha to be had. In fact, this is one of those asset management myths that ends up being repeated so many times that eventually even those who spread them in the first place start to believe them.
The evidence tells us something else entirely. S&P Dow Jones Indices has recently produced its latest SPIVA report on the performance of UK-domiciled, actively managed funds, and the data is truly damning.
I’d rather you read the report yourself than take my word for it, but here are some of the headlines (all periods ending June 30th, 2016):
Over 12 months
91.18% of UK large- and mid-cap managers failed to beat their benchmark
86.03% of UK equity managers failed to beat their benchmark
92.34% of UK managers of US equity funds failed to beat their benchmark
Over five years
91.67% of UK managers of global equity funds have failed to beat their benchmark
Over ten years
85.19% of UK managers of emerging markets equity funds have failed to beat their benchmark
94.72% of UK managers of global equity funds have failed to beat their benchmark
Survivorship
57.70% of UK large- and mid-cap funds trading on 1st July 2006 performed so poorly that they no longer existed ten years later
60.27% of UK-domiciled European equity funds failed to survive the ten-year period
S&P now helpfully produces SPIVA data for all of the major regions of the world. So, how does the performance of UK active managers compare with that of their counterparts overseas? Well, in some cases, it’s slightly better and in others it’s considerably worse. Broadly speaking, UK active managers are about as bad at doing what investors pay them to do — namely to outperform the market — as active managers anywhere else.
There are plenty of competitive activities in which the UK does punch above its weight, Team GB’s record medal haul at the Rio Olympics being a shining example. But let’s finally stop pretending that we’re better at managing other people’s money than the rest of the world, because we aren’t.
Related posts:
UK active fund managers – how good are they?
SPIVA: What it is & what it tells us — an interview with Craig Lazzara
Please note: There is now a SPIVA section on the TEBI website. You’ll find plenty of interesting information on there.
Robin is a journalist and campaigner for positive change in global investing. He runs Regis Media, a niche provider of content marketing for financial advice firms with an evidence-based investment philosophy. He also works as a consultant to other disruptive firms in the investing sector.
