Stock Pickers Wanted Volatility. It Made Their Performance Worse

(Bloomberg) -- Stock pickers have long claimed they would prove their mettle when markets became more volatile. That didn’t happen in 2018.

Only about 35 percent of actively managed mutual funds that buy large-cap U.S. stocks beat the S&P 500 Index last year, down from 42 percent in 2017, according to data compiled by Bloomberg Intelligence. The decline came even as average volatility, as measured by the Chicago Board Options Exchange Volatility Index, climbed 50 percent.

Roughly two-thirds of large-cap growth funds beat the benchmark, while only 11 percent of value funds could make the same claim.

Investors, skeptical that stock and bond pickers are worth the fees they charge, pulled $150 billion from active funds in the first 11 months of 2018, data from Morningstar show. Over the same stretch they added $395 billion to passive vehicles, a mix of mutual funds and ETFs.

Among funds that buy U.S. stocks, those that track indexes now hold 48 percent of assets, according to estimates from Morningstar. That will top 50 percent if the current trend holds.

2018

Strategy
Total Funds
# Of outperformers
% Outperform
Blend1914724.6%
Growth22915366.8%
Value2162411.1%
Total63622435.2%

2017

Strategy
Total Funds
# Of outperformers
% Outperform
Blend1815932.6%
Growth22618581.9%
Value211167.6%
Total61826042.1%

Note: Benchmark is the S&P 500 Index.
Source: Bloomberg.

©2019 Bloomberg L.P.