Active Managers Enjoyed Improved Performance In Q2 According To New Study By Lyxor

Lyxor Asset Management’s latest study into active manager performance shows 55% of them beat their benchmarks in the second quarter of 2017. That’s a significant improvement on results at the end of last year, when only 28% outperformed, and above the 52% of Q1.

First published annually, the Lyxor research now monitors the performance of 3,871 active funds domiciled in Europe (representing EUR 1,300 billion in assets under management) on a quarterly basis.

Active equity managers were the main drivers of the pick-up in performance, with 63% of them outdoing their benchmarks in Q2, helped by improving economic conditions and still-accommodative central bank policies. The most significant moves were recorded among European large and mid-cap managers, world equity and UK equity managers.

In Europe, the performance of active managers has been very closely linked to the improved performance of the low beta factor. This time, their defensive positioning has proven successful, unlike in 2016. European small-caps also staged a strong rebound last quarter, continuing a trend established in previous Lyxor research - active management still tends to be more efficient in less liquid market segments. 73% of global equity managers, most of whom favoured Europe over the US and didn’t hedge their currency risk, were supported by the depreciation of the dollar against the euro.

In contrast, fixed income managers were hampered by the enduring low interest rate environment. Only 35% of them outperformed in Q2, which is a marked reversal from the 53% we saw in the first three months of the year.

Euro high yield and emerging debt proved the toughest segments to crack.

“Our findings highlight just how important fund selection is. Knowing where to exploit the skills of an active manager, and where to opt for low cost passives can be critical. Our study can really help investors make the right choices”, commented Marlene Hassine, head of ETF research at Lyxor.

In order to help investors build better portfolios, Lyxor has developed a quantitative model for monitoring market trends to enable dynamic factor-based allocation. This model is also incorporated in Lyxor’s fund selection process.