This year’s crisis has refuted one common idea – that actively managed funds do better in bear markets. Figures from Trustnet show that so far this year most funds in the UK All Companies sector have done even worse than the 16.4 per cent loss on Scottish Widows' All-Share tracker (selected not because it is the best performing tracker but because it is one your correspondent owns). This is a worse performance than last year, when 62 per cent of funds actually beat that tracker.
Such underperformance is not a quirk of the UK. In fact, in the US active managers have done even worse. New research by Lubos Pastor and Blair Vorsatz at the University of Chicago has found that almost three-quarters of actively managed funds underperformed the S&P 500 during the slump and early phase of the recovery in the index.
But is this year’s performance a fair test of fund managers? In one sense, no. The pandemic is a genuinely exogenous event that no amount of financial expertise could have predicted. Fund managers cannot therefore be blamed for not foreseeing it in the way we might more reasonably blame them for failing to foresee bear markets caused by overvaluations or normal cyclical downturns.