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Many Happy Returns
Active Stock Picking Is Getting Harder
Apr 19, 2023
Active fund managers faced unprecedented underperformance in 2022, with data revealing most couldn't beat their benchmarks even during market downturns. The discussion highlights the shift from active to passive investing, particularly in Europe, where trust in managers is wavering. Delving into emerging markets, the complexities of stock picking and the potential advantages of local managers are examined. The podcast also explores the paradox of academic credentials in investment success and the inherent risks and challenges in selecting effective funds.
39:45
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Quick takeaways
- In 2022, active fund managers in the UK faced unprecedented challenges, with 92% of large-cap funds significantly underperforming their benchmarks.
- The persistent underperformance of active funds, even during downturns, highlights a broader trend favoring passive investment strategies for consistent returns.
Deep dives
Active Management Underperformance
Recent data reveals that active fund managers in the UK had a notably poor performance in 2022, with 92% of large-cap funds underperforming their benchmark. This trend continued with mid-cap stocks, where 97% of active funds failed to deliver better returns than their passive counterparts. Historically, active management has been seen as a viable strategy during market downturns, yet evidence suggests that even in challenging conditions, these managers struggled to justify their higher fees. This persistent trend indicates that active management may not provide the advantages that investors hope for, emphasizing the overall effectiveness of passive investing strategies.
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Discover
highlights
Listen to the best highlights from the podcasts you love and dive into the full episode