The tune for 2017 is somewhat different and actively managed funds have bounced back. This has been boosted by global equity markets (aside from the US) reporting the second strongest two quarters of performance in 20 years, according to analysis from IBOSS.
For UK equity funds in particular, this represents quite some turnaround in fortunes.
Psigma Investment Management’s chief investment officer Tom Becket notes that in 2016 just 16% of funds in the IA UK All Companies sector (42 out of 259) managed to outperform the FTSE All-Share Index.
Contrast this to the first six months of 2017, in which 191 out of 264 funds have beaten the FTSE All-Share.
The value rotation proved short-lived and ultimately left active managers in a better position ready to outperform as the pendulum swung back towards defensive growth allocations in 2017
“Of course it is premature to state it conclusively, but the first half of 2017 might well have seen the start of a revival or a renaissance for active equity funds in the UK,” Becket says.
“The cynics (me among them) would say it was long overdue after a mostly dismal 2016 (and in some places over the longer run), but there are signs a corner has been turned.”
This drastic turnaround in fortunes could be simply put down to active managers benefiting from the power of the rising FTSE 100, as Skerrits Wealth Managements head of investment Andrew Merricks says.
However, Architas investment director Adrian Lowcock points to one of the bigger themes for the tail end of 2016, the rotation away from defensive growth and into value, which left many managers lagging behind.
The value rotation proved short-lived and ultimately left active managers in a better position ready to outperform as the pendulum swung back towards defensive growth allocations in 2017, Lowcock says.
“What caused their underperformance last year was the cause of their outperformance going into 2017,” he says.
“It’s been a long while since we have seen a rotation into value, that change had not happened in a long time and I think it all naturally caught out a lot of investors.”
Active managers should not get too comfortable, though.
