Only 45% of large cap Canadian equity investment managers beat the S&P/TSX Total Return Index in the third quarter of this year, according to the Russell Active Manager Report.
That was down from 53% in the second quarter and 65% in the first quarter of this year. The 45% figure was the lowest number since the second quarter of 2006.
The median large cap manager return was 1.8%, which lagged the S&P/TSX Composite return of 2.0%.
“As the year progressed, it’s become tougher for Canadian equity investment managers but the overall active management environment has improved compared to 2005 and 2006, when resources were dominating,” says Kathleen Wylie, a senior research analyst at Russell Investments Canada.
There was less breadth in the market in the third quarter with only three out of 10 sectors beating the benchmark, down from six out of 10 in the second quarter. And given that active managers on average were underweight two of the three top-performing sectors, that made it difficult to beat the benchmark.
Large cap managers on average were slightly overweight the top-performing information technology sector, which was up 14% and that helped their relative performance. However, they tended to have a significant underweight in the materials sector, which was up 13%—the strongest sector in the quarter. Large cap managers were also heavily overweighted in the industrials and consumer discretionary sectors on average, both of which underperformed in the quarter.
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