This is welcome news for fund managers whose objective is to beat benchmark averages because, in theory, it increases their opportunities to find big, relative winners. It’s also a departure from the monolithic trading that dominated last year.
About 90 percent of active money managers have beaten the Russell 2000 Index so far in 2016, compared to just 43 percent over the last 10 years, according to data compiled by Morningstar Inc. The same outperformance has been seen in the Russell 1000 and 3000 indexes, with year-to-date returns for active investors doubling the 10-year averages for both measures, the data show.
Meanwhile, an easing of investor fears can be seen in the CBOE Volatility Index, which has been below 20 for the past five days, falling 16 percent over that period. The gauge of price swings has plunged 38 percent since Feb. 11, the day the S&P 500 decreased to a 22-month low.
Ray Dalio, who runs Bridgewater Associates LP, the world’s largest hedge fund, said investors should expect low returns, but that stock pickers will outperform.
Investors should be concerned with creating a “good strategic asset allocation mix that is a balanced portfolio,” rather than betting against active investors, he said an interview with Bloomberg Television on March 3.