During a quarter that will make the financial history books, stock pickers earned their keep.
Active managers of U.S. equity strategies generated an average gain of more than 23 percent, the largest positive return in 20 years, according to eVestment. As a result, the majority of U.S. institutional strategies outperformed their benchmarks in the second quarter.
Managers of strategies that invested outside the U.S. did even better. Among managers benchmarked against the EAFE index, for example, 73 percent outperformed their benchmarks.
But the gains didn’t erase the losses from the first quarter. The average loss of all actively managed U.S. equity strategies for the first half of 2020 was around 7 percent.
“The story of Q2 was about the snap back of returns after the largest average losses produced by traditional equity strategies in over 20 years, since at least Q1 2000,” Peter Laurelli, global head of research, said in a statement.
Value continued to get hammered. Strategies investing in growth stocks outperformed value all over the world, according to eVestment. In the second quarter, the median growth manager across global, EAFE (Europe, Asia, Far East), emerging markets, and international stocks beat value managers by an even wider spread than they did in the first quarter, when value managers posted some of their worst returns ever.
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Although it’s hardly a consolation to investors, a bigger proportion of value managers outperformed their benchmarks than growth managers. Year-to-date, 67 percent of large-cap value managers have outperformed their benchmarks compared to 45 percent of large-cap growth managers.
Despite active managers’ overall positive second quarter track record, investors may not have benefitted, depending on which funds they invested in. According to eVestment, there’s been a big difference between the best and the worst managers.
“The dispersion of returns (percentage point difference between top and bottom decile performers) remained very wide across all broad regional segmentations, illustrating just how much deviation there has been within equity markets, globally, as economies and companies grapple with operating within a global pandemic,” eVestment said.
In addition, while managers may have posted good news, there are still a lot of questions about the fundamental nature of the rebound.
“As global markets bounced back, many strategies racked up returns not seen in years despite an economic environment still full of more questions than answers due to the COVID-19 pandemic,” Laurelli said.