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(The opinions expressed here are those of the author, a columnist for Reuters.)
By Jamie McGeever
LONDON, July 11 (Reuters) - With political uncertainty rising, global economic growth far less synchronised than last year and earnings growth becoming less uniform too, it's a stock picker's paradise. Or it should be.
Yet despite the more favourable investing backdrop and a noticeable slowdown of inflows into passive investment funds, the signals that active managers are beating their benchmarks are mixed.
On the face of it, active managers, who attempt to identify market inefficiencies to deliver higher returns for investors, should be doing relatively well.
The first half of the year was marked by new highs for Wall Street and world stocks in January, a record surge in volatility in February and markets' subsequent struggle to regain that momentum as the global growth outlook began to deteriorate.
The S&P 500 ended the first half up less than 2 percent, the MSCI world index down less than 2 pct and European stocks down almost 3 pct. Common to all of them was a growing lack of direction, confidence and conviction.
Correlations and dispersion, the difference in individual stocks' returns versus the broader index, are rising. This is fertile ground for active managers to pick winners and avoid losers.
"Whether you're a value picker or a growth picker, there should be a lot of opportunity," said Bill Street, head of investments EMEA at State Street Global Advisors, which manages $3 trillion of assets, of which $2 trillion track indexes.
"Our mutual funds flow data suggests that at least in 2017 and in Q1 of this year, more funds were outperforming the benchmarks than not. Q1 has been very positive, our active funds have performed very well," Street said.
Data from Morningstar paint a similar picture. Their figures show 43 percent of active U.S. managers outperformed their average passive peer last year, compared with 26 pct in 2016.
Internationally-focused funds did better still. About 55 pct of active funds in the "foreign large blend and diversified emerging markets" categories beat their passive benchmarks last year, up from 36 pct in 2016.
Demand for index-tracking funds, meanwhile, appears to be waning.
European-listed exchange-traded funds (ETFs) attracted inflows of just under $23 billion in the first half of 2018, according to Citi. Annualised, that's roughly half of last year's $90 bln net inflow. Flows were strong in January and February but have since stalled.
According to Blackrock, flows into European-listed exchange-traded products (ETPs) last month slowed to $533 million, the lowest inflow since December 2014.