Only 41% of large cap Canadian equity investment managers were able to the S&P/TSX Composite Index in the fourth quarter of 2007—the lowest number in three years—according to a report.
The Russell Active Manager Report found that last year was very challenging for active managers. The median large cap manager return of 9.6% lagged the TSX’s return of 9.8%.
The last time the median manager lagged the benchmark was in 2005, when the energy sector was strong and most large cap Canadian equity managers were underweight the sector.
“It’s unusual to see the median manager trail the benchmark,” says Kathleen Wylie, a senior research analyst at Russell Investments Canada. “But keep in mind that active managers have historically added value over the long run.”
She adds that the increased market volatility in the equity markets can be a positive for active managers. Those with skill can add more value over the benchmark.
“The expectation is for that volatility to continue this year, which could make 2008 a more favourable environment for active managers,” explains Wylie. “The key is having the expertise and resources to identify and research these superior managers.”
The investment manager returns in the report are total returns, including reinvested dividends and cash, and are gross of management fees and expenses.
To comment on this story, email craig.sebastiano@rci.rogers.com.