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Never before have the world’s equity funds underperformed so much

According to UBS research, the alpha of actively managed equity funds of European-based asset managers was -4.13% in 2022, the weakest performance so far this century. Alpha is an indicator that shows the performance of an investment relative to the market, i.e. the outperformance or underperformance produced by the method or the fund manager (in the case of stock market funds) compared to the stock market index.

The analysts added that due to the volatility that characterizes the year 2022, they expected that the attractive opportunities available in the market would lead to better returns for equity managers, as they performed at a record high in the last similarly volatile year, 2020. According to the report, two-thirds of the underperformance occurred in the first quarter of the year, and 96% occurred in the first half of the year. According to UBS analysts, the deterioration in performance occurred partly because “there was no consistency between the strategy and the selection of the primary reference index”, and also because the fund managers pushed certain growth instruments into the background, writes the UBS Financial Times.

Among actively managed bond funds, alpha was also negative, but according to UBS analysts, this was not so surprising. Investment funds of this type had a -0.46% return compared to the benchmark in 2022, which is the worst result since 2018, but roughly the same as the average performance between 2000 and 2022.

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