Active UK equity funds are among those that have tended to hold up better than passive strategies during the coronavirus sell-off that has blighted markets in recent weeks, Trustnet research shows.
Since their peak on 19 February 2020, equities across the globe have endured heavy selling as investors worried about the spread of the Wuhan coronavirus and the impact it will have on the world economy.
The selling continued yesterday, even though the US Federal Reserve cut interest rates to just 0.1 per cent and announced a $700bn quantitative easing package. Other central banks, including the Bank of England, have loosened monetary policy recently to tackle coronavirus.
Performance of equity markets between 19 Feb and 13 Mar 2020
Source: FE Analytics
Against this backdrop, the average fund in every one of the 39 sectors in the Investment Association universe – aside from IA UK Gilts, IA Short Term Money Market and IA Standard Money Market – made a loss over this period.
The heaviest average losses came from IA North American Smaller Companies (down 25.95 per cent), IA UK All Companies (down 25.10 per cent) and IA UK Equity Income (down 24.59 per cent).
However, Trustnet looked within the Investment Association’s equity sectors to see how active funds and index trackers have been performing while the market sold off over the three-and-a-half weeks under consideration. This research does not include performance yesterday (Monday 16 March).
In the table below we show the average performance of active and passive funds, broken down by the index they are benchmarked against.
For example, our research found the average active fund that uses the MSCI India index as a benchmark has fallen 14.09 per cent over the period examined, while the index tracker was down 20.92 per cent.
Source: FE Analytics
There’s some (relatively) good news for UK equities, even though they have been hit especially hard during the sell-off, as active funds benchmarked against both the FTSE 100 and the FTSE All Share have tended to hold up better than an index tracker.
It’s important to reiterate that these figures are an average and the performance of individual funds can vary widely.
For example, Unicorn Outstanding British Companies and GVQ Opportunities are both benchmarked against the FTSE All Share and reside in the IA UK All Companies sector.
However, Unicorn Outstanding British Companies has fallen 16.92 per cent during the sell-off while GVQ Opportunities is down 33.45 per cent.
Of the 124 IA UK All Companies funds that take the FTSE All Share as their benchmark, 96 have posted a better result than the index’s 27.49 per cent fall between 19 February and 13 March.
As well as Unicorn Outstanding British Companies, Investec UK Equity Income, JOHCM UK Opportunities, Liontrust Special Situations, Trojan Income, Liontrust UK Growth and TB Evenlode Income are some of the UK equity strategies that have held up best.
There’s also a surprising result from the funds benchmarked against the S&P 500.
Active management has traditionally struggled in the US owing to the dominance of passive and the relative efficiency of the market.
Over the past few weeks, the index has dropped by 16.28 per cent (in sterling). Active funds have outperformed passive, although this seems down to fact that several passive funds have underperformed the index by a wide margin.
Active funds that take the S&P 500 as their benchmark have fallen by 20.53 per cent on average but the average tracker is down slightly more with a 20.81 per cent fall.
Legg Mason ClearBridge US Appreciation, Seilern America, AB Select US Equity Portfolio, Fidelity American and Capital Group AMCAP (LUX) have beaten the index with falls of less than 16 per cent.
There’s a mixed picture when it comes to global equities. Active funds benchmarked against the FTSE World have tended to outperform their passive peers in the sell-off by a decent margin.
However, only 17 active funds use this index as their benchmark. Far more – 126 – use the MSCI World and, on average, they have slightly underperformed a passive tracking the same index.
Between 19 February and 13 March, the MSCI World was down 19.03 per cent in sterling but Trojan Global Income fell just 12.88 per cent.
Davy Defensive Equity Income, Barings Global Dividend Champions, Fiera Capital Global Equity and Morgan Stanley Global Brands Equity Income also have held up better by falling around 15 per cent.