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After strong first quarter, active managers play defense

Active managers took advantage of global market volatility during the first quarter. Among the 1,200 institutional funds monitored by Russell Investments, more than half outperformed their respective benchmarks. Products benchmarked to the MSCI World ex-U.S. index and the MSCI U.K. index did particularly well, with about 80% of the funds in each group outperforming. U.S. managers had a relatively rougher go of it; 50% of the large-cap managers outperformed the Russell 1000 index and 45% of the funds indexed to the Russell 2000 beat the benchmark. During the fourth quarter of 2017, the only cohorts to have 60% or more of their funds beat their benchmarks were those indexed to the S&P/ASX 300, TOPIX and Russell 2000.

The volatility drove allocations toward more defensive sectors such as consumer staples and telecom, while many managers took advantage of attractive valuations created by the overall market downturn. Russell further added that despite what would normally be a value-friendly environment, growth managers outperformed their value peers.