Few active funds across both equities and bonds have maintained consistent outperformance relative to peers, new analysis shows.
S&P Dow Jones Indices (SPDJI) measured active managers over three and five years to December 2022 and said active management outperformance is “typically relatively short-lived” regardless of asset class or style focus.
Few funds consistently outranked their peers, noted SPDJI in its Europe Persistence Scorecard, which is related to the firm’s well-known SPIVA Scorecard that measures the consistency of outperformance among actively managed mutual funds.
The firm measured actively managed Europe equity and US equity funds whose 12-month performance placed them in the top quartile as of December 2020. However, “not a single fund maintained its top-quartile performance over the next two 12-month intervals”.
Over a five-year horizon, it was “statistically nearly impossible” to find consistent outperformance.
Over the long term, poor performance has proven to be a reliable indicator of future fund closures.
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