Active Managers Enjoying 3 Key Tailwinds in Declining Market | ETF Trends

Amid a declining market, active managers, particularly large-cap active managers, are having their best year since 2009. According to a report from S&P Dow Jones Indices, nearly half (49%) of large-cap domestic equity funds outperformed the S&P 500 in the first six months of 2022, while the S&P 500 fell 20% on a total return basis during the same period.

By comparison, in 2009, 52% of funds exceeded their benchmark indexes over the full year. The S&P 500 rose 26% that year.

“Declining markets make active management skills all the more valuable, and our report shows that a significant minority of active managers were able to outperform in several categories,” according to S&PDJI.

Anu Ganti, senior director, index investment strategy at S&P Dow Jones Indices and author of the report, sat down with Bob Pisani for CNBC’s “Halftime Report” to discuss some of the key reasons why active managers the have been performing relatively better this year.

The first tailwind Ganti pointed out was “rising dispersion, or the spread among returns in an index.” Ganti noted that “the greater that spread is, the greater the opportunity to add value from stock selection.”

The second reason why active has been doing better than usual this year is because of “the underperformance of megacaps… which could help active portfolios that are closer to equal than cap weighted.”

“And finally, value outperformed after decades of underperformance,” Ganti said. “So, these are all key reasons why we saw some potential tailwinds in this declining market.”

“One of the key takeaways from the latest SPIVA data was the active managers can outperform in volatile markets, but it helps even more when the fees are relatively low compared to fund peers. Increasingly, asset managers have offered competitively priced active ETFs,” said Todd Rosenbluth, head of research at VettaFi.

As part of its lineup of active exchange traded funds, T. Rowe Price offers a suite of actively managed equity ETFs, including the T. Rowe Price Blue Chip Growth ETF (TCHP), the T. Rowe Price Dividend Growth ETF (TDVG), the T. Rowe Price Equity Income ETF (TEQI), the T. Rowe Price Growth Stock ETF (TGRW), and the T. Rowe Price US Equity Research ETF (TSPA).

T. Rowe Price has been in the investing business for over 80 years through conducting field research firsthand with companies, utilizing risk management, and employing a bevy of experienced portfolio managers carrying an average of 22 years of experience.

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