It remains incredibly difficult to generate returns in the stock market that beat (or outperform) a passively managed fund tracking the S&P 500.
According to new data from S&P Dow Jones Indices (SPDJI), 57.3% of U.S. large-cap equity fund managers underperformed the S&P 500 in the first six months of 2024.
The fact that a handful of “magnificent” stocks have been driving market performance has been a challenge.
“In an environment characterized by mega-cap outperformance and the associated rise of market concentration, with the S&P 500 Top 50 outperforming the S&P 500 by 5% in the twelve months through September, active managers may find it difficult to keep up with market-capitalization weightings,“ SPDJI’s Anu Ganti said.
This 2024 performance follows 14 consecutive years in which the majority of fund managers in this category have lagged the index.
And as you stretch the time horizon, the numbers get even more dismal. Over a three-year period, 86.1% underperformed the S&P 500. Over a 15-year period, 89.5% underperformed. And over a 20-year period, 91.8% underperformed.
To be fair, the goal of every fund manager and investor isn’t necessarily to beat some benchmark. Nevertheless, it may be disheartening for the more active investors to see better returns achieved by an index that investors can buy in a low-cost fund.
