Most UK equity managers underperform

Most UK equity managers underperform

Nearly 90 per cent of active UK equity funds underperformed the wider market in the year to July 2016, a four-fold increase on the proportion who did so in the year to December 31, 2015.

Research from S&P Dow Jones Indices found that, when compared with the S&P UK BMI index, 86 per cent of active UK equity portfolios underperformed in the year to the end of June 2016.

The period was characterised by significant market volatility – including a nervous opening six-week period to 2016 and political risk in the shape of the EU referendum, but also a sharp market rally from mid-February onward

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The figures mark a stark increase in the number of funds underperforming, up from just 22.2 per cent for the calendar year 2015.

Active UK equity vehicles also struggled to beat the market over a longer time horizon, with the report finding that 60 per cent underperformed over three years compared with 63.1 per cent on a five-year basis and 77.1 per cent over a decade.

Managers also found life difficult in other regions. To the end of June 2016, the proportion of euro-denominated active European equity funds underperforming the S&P Europe 350 rose to 57.4 per cent, from 31.9 per cent for the 2015 calendar year.

The picture was bleaker both globally and in the US, where buoyant markets have become a challenge to beat. Some 87.9 per cent of active global equity funds underperformed the S&P Global 1200 over the one-year period, while in the US some 93.5 per cent of active equity managers failed to beat the S&P 500.