While the markets roiled and volatility spiked, investors were better off in passive index-based exchange traded funds, instead of actively managed strategies that suffered through their worst performances in years.

According to Copley Fund Research’s latest survey of 1,350 funds with $4 trillion in assets, U.S. active funds just went through their worst underperformance relative to passive funds since Q1 2016, falling short 1.44% against than benchmark indices. Meanwhile, Active Global Emerging Markets fund underperformed 1.36% of indices while Asia funds were 1.04% below their passive peers, the worst underperformance since Q3 2018.

During the market pullback, value-focused strategies, which favor cheaper stocks, stood out as they underperformed both benchmarks and their more aggressive growth peers for the first quarter of 2020. Copley data showed aggressive growth strategies that lean toward companies with higher valuations and growth expectations have outperformed value portfolios by the most since 2017 – growth strategies outperformed value by 14.3% in the U.S. fund category.

“Active strategies focused on aggressive growth stocks are performing well in the downturn,” Steven Holden, CEO of Copley Fund Research, said in a note. “No one could have anticipated the scale of this market rout, and yet these strategies are adding relative performance despite the overall ugliness of the market.”

However, for most active fund managers, many missed out on the aggressive growth, notably the outperformance of China and U.S. technology companies.

“The outperformance of China was costly for active managers, who have been increasing underweight bets over the last 18 months” Holden added, pointing out that Global, EM and Asia Ex-Japan funds were all close to record underweight in Chinese equities going into the crisis.

Meanwhile, looking at U.S. managers, their underweights in tech giants like Microsoft, Apple, and Amazon also caused them to miss out. The three company stocks made up 14.29% of the U.S. S&P 500 Index and are underweight by most U.S. and global funds, contributing 0.51% of underperformance for active US funds and 0.31% for global funds.

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