Passive nor active funds 'consistently outperform the other' says EFAMA

Significant differences in net performance were observed among equity UCITS across various industry sectors for both active and passive funds in the European Fund and Asset Management Association's (EFAMA) just published latest edition of its Market Insights series, titled 'The sectoral performance of active and passive UCITS - is a simple measure enough?'

EFAMA said industry sector matters when comparing the performance of active vs. passive equity UCITS in its research comparing the net performance of different categories of equity UCITS funds over the last ten years (2014-2023).

Among further key findings, it said there was a significant differences in net performance are observed among equity UCITS across various industry sectors for both active and passive funds.

While passive equity funds generally outperform active equity funds when comparing net returns across the entire universe of equity funds, this pattern does not hold consistently across all sectors.

Some active funds outperform passive funds and vice-versa depending on the industry sector, the year, and the time horizon, demonstrating that no single category consistently delivers superior performance.

These findings remain robust even after accounting for return volatility, the research found.

Vera Jotanovic, senior economist at EFAMA, commented: “Our analysis reveals significant differences in the average net performance of sectoral equity funds, with neither passive nor active funds consistently outperforming the other.”

EFAMA’s senior director Bernard Delbecque, said: “Given the high diversity among investment funds, retail investors should seek professional guidance before allocating their savings into specific equity funds, ensuring their choices align with their individual investment goals and preferences.”