COMMENT: FT Editorial
Last year was a bleak one for Britain's active fund managers, who face the prospect of an unhappy New Year to come. 2019 will be remembered as the year when the industry's talisman, the star stockpicker Neil Woodford, was shown to have feet of clay and had his flagship fund wound up. One of his protégés, and another of the old-school active managers, Mark Barnett of Invesco, was shown the door after his fund's performance flagged. There have been unflattering revelations about the sales tactics and incentives at St James Capital, a traditional home for upper-middle class retirement savings. As if that were not enough, Mr Woodford's demise shone a harsh light on the promotion of active funds at Hargreaves Lansdown, the popular money-management platform in the UK.
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These events have tarnished the record of star stockpickers. More worryingly, they have helped to highlight the already poor performance of the active fund management industry. Evidence has piled up that active fund managers consistently lag benchmarks, once fees are included.
Analysis of European funds by Morningstar, a data provider, showed that active funds have not kept pace with index trackers in the past ten years. Research in 2016 by S&P Dow Jones, the index provider, found that 99 per cent of actively managed US equity funds underperformed. Investors have voted with their feet; according to Morningstar, in the year to June, capital flowed out of active mutual funds in the US and Europe at the highest rate in at least three years.