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Silver linings from the active fund bloodbath

The assertion that active funds do better at beating markets in volatile times has not fared well in the recent sell-off. To take one analysis, investment platform AJ Bell recently noted that just 30 per cent of active open-ended funds from major equity sectors had beaten a passive alternative in the first half of 2022, with UK equity and emerging market funds doing especially poorly.

A granular take on the same issue is even more scathing about professional stockpickers. Columbia Threadneedle’s quarterly FundWatch report highlights funds in major Investment Association (IA) sectors that have delivered top quartile returns over three years to the end of a given period. The latest edition, which covers periods to the end of June, finds this consistency ratio to be in “stunningly low territory”, with the all-time low reached in the first quarter (Q1) being superseded by the latest figures.

Just 0.35 per cent of the sample body – or four of 1,153 funds – achieved this level of consistent outperformance, down from 0.45 per cent in Q1. The four funds, Quilter Investors Sterling Diversified Bond (GB00B758PM41), Matthews Asia Small Companies (LU0871674379), Luxembourg Selection Active Solar (LU2341110190) and Fidelity Japan (GB00B882N041), focus on very different parts of the investment universe. To make clear the magnitude of this record, the FundWatch report has been running since 2008.

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