Active equity funds underperformed while manager search activity in the equity market increased in the second quarter of 2024, according to a report by consultancy firm bfinance.
The report showed that in the second quarter the average active global equity manager delivered relative returns of –4.5% net of fees against the MSCI All Country World Index, a global equity index that tracks the performance of stocks in both developed and emerging markets.
The report showed a concentration in a few large-cap technology companies amid ongoing AI enthusiasm. This created a challenging environment for active global equity managers, with fewer than 30% of global large-cap and all-cap managers outperforming the MSCI ACWI, net of fees.
“The difficulties faced by active equity managers have stood out, with average returns lagging benchmarks so far in 2024,” Kathryn Saklatvala, head of investment content at bfinance, said in a statement.
The underperforming active equity funds have meant a significant increase in equity manager search activity, with data showing an increase to 32% of new manager searches by asset class in the 12 months ending June 30, up from 19% in the previous 12 months. This was despite the second quarter not presenting a "particularly attractive buying opportunity," the report said.
Meanwhile, active managers in fixed income have delivered better relative results than their equity counterparts with 96% of U.S. investment grade credit managers outperforming the benchmark, according to bfinance.
Emerging market debt manager searches have increased significantly, accounting for 31% of total new fixed-income manager searches in the 12 months ending June 30, up from 6% in the previous 12 months.
Private debt searches have remained in "strong demand" over the past year, representing 20% of mandates, raising approximately $52 billion in capital, even though the overall level of new manager searches within private markets appeared somewhat subdued compared to previous years, according to the report.
Private debt accounted for 43% of market manager searches for private markets in the 12 months ending June 30, increased from 39% the previous 12 months, whereas multiasset private markets remained at 2%.
But “despite some signs of a stabilization of performance and increased activity in parts of the private market asset classes, the continuing trend in Q2 was one of weakness and ongoing uncertainty. A major reason has been the slow reduction of inflation which remains above target rates in many countries leading to delays in interest rate cut expectations,” the report said.
The report features data from the consultant’s global client base, located across 45 countries.
