Actively managed open-ended funds and investment trusts that invest on a global basis have collectively underperformed their individual benchmarks over one, three, five and 10 years, meaning British investors may have been better off in tracker funds. Over 10 years (to 29/11/13), actively managed global equity funds underperformed by 11.6 per cent in aggregate, returning an average of 107.67 per cent, according to Morningstar data.
Meanwhile, the data shows fund managers investing in individual Bric country funds (Brazil, Russia, India and China) plus those that invest across the Bric nations have done better than global equity funds when it comes to beating their relative indices – the reason why investors buy actively managed funds with higher fees.
Bric funds outperformed their benchmark indices by 8.06 per cent over five years and 2.66 per cent over one year, with a slight underperformance of 2.69 per cent over three years and 0.39 per cent over 10 years.
Over 10 years their collective total return (226.87 per cent) was more than double that of global equity funds (107.67 per cent), and over five years BRIC funds made 100.07 per cent compared to a considerably lower 83.3 per cent for global equity funds.
But over the last year Bric funds have under performed developed market funds, causing investors to snatch £5bn back from them during that period, according to Morningstar.
Patrick Connolly, financial planner at Chase de Vere, said a heavy weighting to the US is likely to be the reason why some global equity funds under outperform their benchmarks.
"Stock picking is notoriously difficult in the US market, which is why so many investors opt for cheaper tracker funds or exchange traded funds (ETFs) to get exposure to the country," he said. "However in emerging markets, companies are generally under researched which creates a bigger opportunity for active managers to outperform."
