Active GEM Funds Blitz Passive in 2019

Taken from our Global Emerging Markets quarterly research, we analyse the short and long-term performance of active EM funds versus the passive equivalent (in our case, we use the best tradeable representation of the benchmark, the I-Shares MSCI Emerging Markets ETF [EEM-US]). Our analysis shows EM active managers achieving their 3rd successive quarter of outperformance this year. This surmounts to an average outperformance of +3.65% in 2019, with 77% of active managers outperforming the benchmark. Over the longer-term, active GEM managers have outperformed the I-Shares MSCI Emerging Markets ETF in 11 of the last 15 years (including ytd 2019).

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Our analysis also categorises funds based on their levels of independence from the benchmark portfolio. It shows that long-term outperformance is best achieved through a highly active approach, with low active, or closet trackers dragging down the long-term returns of the asset class.

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Steven Holden