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November 14th, 2019
By Scott Treacy, CFA
Public equities have performed favorably in the long-term (five years) and short-term (year-to-date) compared to other asset classes, with the lone exception being real estate (the NCREIF property index has an annualized return of 8.6% over five years). We reviewed the equity manager performance (gross-of-fees) in the Investment Metrics Global Database across different segments of the market. You can find the Q3 2019 quartile rank performance figures in the table below.
Over a five year time period, as of September 2019, fifty percent of the broad public equity peer groups have outperformed their benchmark at the median level. The outperforming peer groups were international large-cap., emerging markets large-cap., US large-cap. value, and US small-cap. Over the shorter time period (year-to-date), only two peer group medians have outperformed their respective benchmarks. The two outperforming peer groups were emerging markets large-cap. and US small-cap. When looking at overall performance, the US large-cap growth universe provided the best long-term return to investors, with an annualized return of 12.8%. Unfortunately for active managers, the Russell 1000 growth index had an annualized return of 13.4%, which is 0.6% above the median active manager.
When looking at the top quartile ranked active managers, they have provided impressive active returns over their benchmarks in the long-term. The top-ranked active managers within US small-cap, international large-cap, and global have been the most impressive in beating their benchmarks. The top quartile rank breakpoints for 5 year annualized active returns were +2.8%, +1.8%, and +1.8% respectively. In the short-term (year-to-date), the most impressive active manager peer groups have been US small-cap (+5.3%) and emerging markets equity (+5.2%).
Below you can find some of the top year-to-date performing portfolios from the peer groups mentioned above. We only listed those top performers who had at least $100M in product assets.
In closing, those investors with higher exposure to public equities have benefitted from robust returns. Conversely, those investors that have diversified away from this asset class have missed out on a great growth opportunity for their plan portfolios.
For more information on peer group performance in Q3 2019, join Brendan Cooper and Scott Treacy, CFA, from the Investment Metrics’ Research Team on November 19th at 11:00 EDT for a live webinar as they cover the quarter’s net asset gainers and flows.
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