Active international investment does not deserve its poor reputation according toIntech Financial Serviceswhich has revealed that the median specialist international share manager delivered 2.7 per cent per annum over the last five years.
The figures come out of Intech’s December performance survey of international share managers released today with the figures for the five years to the end of December last year.
Intech says the figures compare well to the MSCI World ex Australia Accumulation Index Unhedged benchmark over the same period which only returned 0.7 per cent per annum.
Intech says these figures contradict a widely held belief that active international shares managers have been unable to out-perform index managers but says the real measure of these managers should be taken over a full market cycle of bull and bear markets.
On this basis Intech says around three quarters of active international managers beat the benchmark by two per cent per annum and over longer cycles of 10 and 15 years the median manager beat the benchmark by 3.8 per cent and 4.7 per cent per annum respectively.
InTech chief investment officer Ron Liling says the analysis shows the problems in examining returns within just a set period and says while there have been periods of under-performance this does not mean active management does not add value.
Liling says that a failure to adopt an active strategy in international shares can be costly and says passive investors would have been tied into the slide of the Japanese equity market from its index weighting of around 40 per cent in the late 1980’s to around 10 per cent at present.
He says passive investors would have suffered under similar conditions with the US market over the last two or three years but active managers out-performed the benchmark as they had the ability to under-weight their exposure to both markets.
