Multi-Manager

BMO Multi-Manager TrackerWatch

Trackewatch is an independent piece annual review and analysis of the passive fund industry
April 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.

Trackewatch is an independent piece annual review and analysis of the passive fund industry carried out by the BMO Multi-Manager team.

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 – we look at passive data over this period and compare it to active funds
  5. Passive News – a new section looking at developments that 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 funds

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 passives 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 +32.0% and -38.1%!
  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 1997 there were a total of 48 passive funds. By the end of 2017 this was 372, an increase of almost eight-fold.
  3. Over 20 years, the average passive fund has underperformed the average of all funds in all five of the equity market groups we analysed.
  4. Also, over 20 years the average passive fund has underperformed when compared to a dominant reference index by an average of 25% over the seven markets.
  5. The best active equity managers have delivered as much as five 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 2017.

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.