An excellent article posted on Morningstar.com touts the fact that Active fund managers in Europe have the same struggles beating the Passive investment approach as they do here in the US.
…actively managed funds have failed to survive and beat their benchmarks, especially over longer time horizons…
The European Morningstar Active/Passive Barometer measures active managers’ success relative to passive funds, not the index itself, so it’s an apples-to-apples categorical comparison, within the given sub asset classes like large-cap, small-cap, growth, value, and so forth.
Read the full article here, but we are posting five key takeaways about active vs. passive fund management in Europe directly from the Morningstar post:
- European stock-pickers’ long-term success rates are low. A majority of active managers both survived and outperformed their passive average peer in just two of the 49 categories we examined over the decade through June 2018.
- Over the 10 years through June 2018, active managers’ success rate was less than 25% in more than half of the categories surveyed. This includes core-holding categories.
- Survivorship rates are positively correlated with odds for success. The biggest driver of active funds’ failure is their inability to survive, which is often a result of lackluster performance.
- Comparing mortality rates between active vs. passive fund management shows that the latter have the better odds of survival over the long term. The contrast is starker over longer lookback periods.
- Active fixed-income managers’ success rates have also been low. Over the past decade, less than a fourth have managed to both live and outsmart their average passive peer in 10 of the 12 categories we studied.
So, bottom line is this: Passive Make wins. Again!
Active vs. Passive Fund Management in Europe
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