Active Fund Managers Ride Tech Stocks to Best Performance Since 2009Active Fund Managers Ride Tech Stocks to Best Performance Since 2009
Approximately 52 percent of active fund managers are beating their respective benchmarks this year, the highest relative performance since nearly 55 percent eight years ago.
September 26, 2017
By David Randall
NEW YORK, Sept 26 (Reuters) - An overweight position intechnology stocks like Facebook Inc and Google-parentAlphabet Inc is helping more active fund managers beattheir benchmarks than at any point since 2009.
The performance comes as the managers battle passive indexfunds and exchange traded funds that have grown popular withinvestors.
Approximately 52 percent of active fund managers are beatingtheir respective benchmarks this year, the highest relativeperformance since nearly 55 percent eight years ago, accordingto Lipper data. Last year, only 26 percent of fund managers wereable to beat their benchmarks, the worst performance for theindustry in more than a decade.
This year's outperformance is powered largely by growthfunds, with the average large-cap growth fund beating the 11.7percent gain in the benchmark S&P 500 for the year to date by 3percentage points. Among the most common overweight positionsheld by mutual fund managers include Facebook, Google, PayPalHoldings Inc and Visa Inc, all of which are up by20 percent or more this year, according to Goldman Sachs.
The jump in technology stocks is also helping put theaverage long/short equity hedge fund on pace for the bestperformance since 2009, with more funds concentrating theirassets in companies such as Ebay Inc, whose shares areup 28 percent for the year to date.
"Funds continue to rely on just a few stocks to driveperformance," Goldman Sachs noted, with the average fund holdingnearly 70 percent of its assets in its 10 largest positions, alevel of concentration near record highs reached in early 2016.
While mutual fund managers are putting up their bestperformance numbers in nearly a decade, it may not be enough tostop the flow of assets to passive index funds or exchangetraded funds, said Todd Rosenbluth, director of fund research atNew York-based CFRA. Financial advisors are increasingly lookingat annual fees as much as performance numbers, making it moredifficult for higher-cost active fund managers to draw assets,he said.
In July alone, investors put $10.8 billion into U.S.passive equity funds, up from $9.3 billion the month before, andpulled $19.6 billion out of funds run by traditionalstockpickers, according to Morningstar data.
"Some of the money is leaving regardless of performance andis more tied to lower fees and shifting business models" amongfinancial advisors, Rosenbluth said. "An advisor who has shiftedaway from active management to lower-cost passive funds isunlikely to come back due to 9 months of performance success."(Reporting by David Randall; Editing by Jennifer Ablan and;Andrew Hay)
