Active Funds Struggle to Beat H1 2024 Benchmarks
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Active fund managers showed varied results against their benchmarks in the first half of 2024, with 57% of large-cap managers failing to beat the S&P 500, according to S&P Dow Jones Indices’ latest SPIVA report.
The results underscore the ongoing challenge facing active management as investors increasingly weigh their options between active and passive strategies in a market dominated by mega-cap stocks, the report revealed.
Mid-cap managers had an even tougher time, with 71% falling short of their benchmark, while small-cap managers showed surprising strength with only 15% underperforming the S&P SmallCap 600, the SPIVA data showed.
The S&P 500 Top 50 outpaced the broader S&P 500 by 5% through September 2024, creating a challenging environment for managers trying to match market returns, the report found.
Active Funds Find Fixed Income Success
Fixed income managers found more success in the current market, with 80% of general investment-grade funds and 61% of high-yield funds beating their benchmarks, benefiting from tightening credit spreads, according to the data.
Government bond categories faced steeper challenges, with 75% of general government funds underperforming their benchmark, the iBoxx $ Domestic Sovereign & Sub-Sovereigns index, the report noted.
The data showed larger funds significantly outpacing smaller ones in performance. The gap between asset-weighted and equal-weighted average returns for large-cap core funds hit 2.5% in the first half of 2024, exceeding the 2.4% differential seen in 2023.
Value managers across market caps demonstrated particular strength, with only 28% of large-cap value funds underperforming their benchmarks, the report stated.
Mid-cap and small-cap value managers performed even better, according to the data. Only 12% of mid-cap value funds and 6% of small-cap value funds fell short of their respective benchmarks.
The dispersion within active fund categories narrowed compared to 2023, the report found. The first half of 2024 interquartile range for all large-cap funds declined by more than half, coinciding with lower market volatility.