Multi-Manager

BMO Multi-Manager People PassiveWatch

PassiveWatch is an independent piece annual review and analysis of the passive fund industry
February 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.

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 2018.

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 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 – US sector range from +9.8% and -11.1%!
  2. The huge growth in the number of passives continued, increasing their influence on the average fund returns. Across the 7 market groups we surveyed, in 1998 there were a total of 47 passive funds. By the end of 2018 this was 431, an increase of over 9-fold.
  3. Over 20 years, the average active fund has outperformed the average passive fund in three out of the five sectors analysable (two sectors do not have 20 years’ worth of passive fund data).
  4. Also, over 20 years the average passive fund has underperformed when compared to a dominant reference index by an average of 54% over the 5 markets.
  5. The best active equity managers have delivered as much as six times their index benchmark over 20 years.
  6. 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 2018.

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.

Use our handy glossary to look up any technical jargon you are unfamiliar with.

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