Multi-Manager

BMO Multi-Manager People PassiveWatch

PassiveWatch is an independent piece annual review and analysis of the passive fund industry
April 2020

Risk Disclaimer

Please note that this is a marketing communication and does not constitute investment advice or a recommendation to buy or sell investments nor should it be regarded as investment research. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of its dissemination. Views are held at the time of preparation.

Past performance is not a guide to future performance.

Stock market and currency movements mean the value of investments and the income from them can go down as well as up and you may not get back the original amount invested.

Welcome to the latest edition of BMO Multi-Manager PassiveWatch, an annual review and analysis of the passive fund industry. All data is from Lipper Global sectors and is calculated in total return terms in sterling for periods ending 31st December 2019.

This edition’s analysis includes:

  1. Tops and Bottoms – a look at the range of tracker performance in the main Lipper Global sectors.
  2. Sector Trends – which are the best-selling passive sectors?
  3. Popularity – which sectors have the highest proportion of passive funds?
  4. 20 Years – how have both active and passive funds compared over the long term?
  5. Passive News – we review recent developments which have caught our eye
  6. Aspects of Selection – things to be aware of when selecting passives (methodology, tracking error, costs, stock lending etc.
  7. The BMO Multi-Manager View – how we do and don’t use passive

A quick summary of the main findings can be found below. For a more in-depth insight please click here to read the full article. 

  1. There is a vast range of performance between the best and worst passive funds due to the choice of index benchmark, charges, dividend policy, gearing, currency, tracking methodology and other features. For example, over just one year the best and worst passive funds in the Lipper Global Equity – Emerging Markets Global sector range from +35% to -1.5%!
  2. The huge growth in the number of passives continued, increasing their influence on the average fund returns. Across the seven market groups we survey, in 1999 there were a total of 60 passive funds. By the end of 2019 this was 439, a seven-fold increase.
  3. Also, over 20 years the average passive fund has underperformed when compared to a dominant reference index by an average of 52% over the five markets (two of the markets did not have a passive fund 20 years ago).
  4. The best active equity managers have delivered as much as eleven times their index benchmark over 20 years.
  5. An ‘agnostic’ approach that accepts that, over any sensible investing period, both can play a role at different times for different markets would seem to be underpinned by the data

 

All data is from Lipper Global sectors and is calculated in total return terms in sterling for periods ending 31 December 2019.

Risk Disclaimer

Please note that this is a marketing communication and does not constitute investment advice or a recommendation to buy or sell investments nor should it be regarded as investment research. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of its dissemination. Views are held at the time of preparation.

Past performance is not a guide to future performance.

Stock market and currency movements mean the value of investments and the income from them can go down as well as up and you may not get back the original amount invested.

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