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Volatile Markets Highlight Benefits of Active Management

Volatile Markets Highlight Benefits of Active Management

September 22, 2022

Active managers are giving investors a leg up in the challenging markets of 2022. The 2022 SPIVA U.S. Mid-Year Scorecard reports that more active managers are beating benchmarks in many categories, including U.S. large-cap stocks and delivering value for clients in a turbulent market. The report says “declining markets make active management skills all the more valuable” as active managers can quickly make decisions, conduct research, and reverse course in a market stymied by global inflation, rising rates, economic uncertainty, geopolitics, and other risk factors.

SPIVA found that actively managed U.S. large-cap funds are on track for their best year since 2009 against the S&P benchmark, with 49% beating the benchmark. This is a significant improvement from last year and shows that skilled managers are exploiting volatility for the benefit of their investors. One reason for this is that dispersion is on track for its highest annual reading since 2009, and S&P notes that “higher dispersion implies a greater possibility of generating above-average performance through judicious stock selection.”

The numbers across other equity categories were mixed. U.S. Mid-Cap Core Funds showed big gains in outperformance with 67% of funds beating the benchmark. Other categories like U.S. Mid-Cap and U.S. Small-Cap showed either minimal improvement or a decline.

In fixed income, 93% of Core Plus Bond funds and 59% of actively managed high-yield U.S. funds beat their benchmarks. The numbers were not as good for General Municipal Debt, Loan Participation, and Intermediate U.S. Government categories.

Performance in individual categories may ebb and flow, but the SPIVA data shows that active management is a necessary part of any portfolio, and its importance only grows in times of volatility. With economic uncertainty and inflation likely to remain market drivers for the foreseeable future, investors can continue to benefit from the insight and experience of an active manager.


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