Active managers fared better in international developed and international small-cap categories; however, 54.1% of global equity and 57.5% of emerging market equity active fund managers lagged behind benchmarks. [Sector ETF Rotation Strategy]
S&P notes that active international small-cap equities remain the only category that has consistently outperformed benchmarks.
In comparison, index-based ETFs passively track a benchmark index, either through a sampling technique whereby the fund selects a portion of securities from the underlying index or through full replication. Consequently, the ETFs will closely follow a benchmark.
However, index-based ETFs won’t perfectly track benchmarks as factors like the expense ratio or timing on portfolio rebalancing may cause slight tracking errors. [How Tracking Error Can Impact ETF Performance]
For more information on ETFs, visit our ETF 101 category.
Max Chen contributed to this article.