Active managers struggling says SSgA

As Australian superannuation fund trustees look for ways of extracting even better returns for members, State Street Global Advisors (SSgA) has issued a sobering assessment of investment managers who pursue overly-aggressive strategies.

SSgA this week released new research which it said showed that the majority of active Australian equity managers struggled to produce persistently above benchmark returns after fees.

It said this was reinforcing the trend for investors to use cheaper passive strategies to gain a “core” exposure to equity markets.

The SSgA Manager Persistence Survey, released in Australia on Monday, looked at the performance of Australian equity managers, international equity managers and listed property trusts for the period from June 30, 1991, to June 30, this year, and found that overall, few managers had outperformed the threshold.

Commenting on the survey outcome, SSgA’s head of structure products in Australia Susan Darroch said the results showed that investors needed to be aware of their active managers’ ability to outperform because many did not beat the adjusted threshold with any measure of persistence.

She said the results showed that the performance threshold suggested for some investors paying the top margin tax rate had a significant impact on the attractiveness of active management.

Darroch said the findings also supported the view that a low-cost passive or enhanced exposure to the market, combined with more aggressive active satellite ‘bets’ could produce better returns at lower risk and lower cost.