The active management environment continued to improve throughout 2014, finds the Russell Canada Active Manager Report.
Sixty-five percent of Canadian large cap managers beat the S&P/TSX Composite Index in the fourth quarter, completing a straight line progression: 53% the third quarter, 41% in the second and 31% in the first quarter.
Using annual returns, 55% of large cap managers beat the benchmark in 2014, down from 94% in 2013, the best year since 2001. The median manager return was 11.3% in 2014, ahead of the S&P/TSX Composite Index return of 10.6%. All data cited is gross of fees.
Read: Active management environment improves in Q3
Sector breadth improved in the fourth quarter with eight of 10 sectors beating the benchmark compared to seven of 10 in the third quarter.
Large cap managers were favourably positioned in six of 10 sectors, with overweights on average in four of the outperforming sectors and underweights to the underperforming energy and materials sectors.
Read: Majority of managers didn’t beat benchmark
“It is worth noting that 2014 was the fourth consecutive year that the median large cap manager return exceeded the benchmark. During those four years, 69% of large cap managers outperformed the benchmark on average,” says Kathleen Wylie, head of Canadian equity research at Russell Canada. “There are certainly periods that have been more challenging for active managers such as 2009 and 2010.”
Over the last 10 years, 57% of Canadian large cap managers have beaten the benchmark and the median manager return was roughly 80 basis points ahead of the S&P/TSX Composite Index return on average using annual returns.
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