Funds are failing to deliver top-quartile returns
The funds industry is failing to deliver top-quartile returns with the average falling to a historic low in the first quarter, according to new research.
Just 1.8 per cent of funds consistently achieved top quarterline performance over the past three years, according to BMO’s latest FundWatch survey.
BMO analysed 1,085 funds with a three-year track record in the 12 main IA sectors and found it lags behind the 3.2 per cent in the previous quarter. It is also below the historic average of between two and four per cent.
The pandemic has not helped matters as markets grappled with what the future will look like, BMO investment manager Kelly Prior suggests. “The first quarter of 2021 [offers] a taste of what might be to come in terms of volatility between styles of investing leading returns.”
Since the financial crisis as interest rates fall to record laws, certain styles of investing have outperformed the leaderboard “while others have had to pedal hard just to stand still.”
““Against this backdrop, in recent years we have seen managers leaning into their preferred style of investing, such as value or growth as the market has become more bifurcated,” Prior says.
It has led to less consistent performance of individual funds compared to the average.
The survey also found the IA North American sector secured the highest proportion of top quartile performing funds over three years at just under six per cent.