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Alternative Market Briefing

Lyxor attributes active funds' outperformance to choice of risk factors

Wednesday, September 28, 2016

amb
Marlène Hassine
Benedicte Gravrand, Opalesque Geneva:

Lyxor ETF Research compared the performance of active funds domiciled in Europe to their benchmark over a ten-year period and found that the majority do not, as is commonly believed, outperform their benchmark. Furthermore, what really drives the outperformance is the selection of the right risk factors.

Marlène Hassine, head of ETF research at Lyxor ETF, uncovered in a study that in the ten years leading to 2015, only 20% of European domiciled active funds outperformed their benchmark. The ratio is slightly higher over five years, at 23%. But in 2015 alone, almost half of the funds outperformed – compared to 25% in 2014.

2015’s top three performing universes were France Small & Mid Caps, China Equity and Europe Large & Mid Caps. "While it is well known that more opportunities can be found in less efficient markets like the first two universes, the latter results for Europe Large & Mid Caps are more surprising," she comments.

The three worse performing universes were European Govies, European High Yield and Japan Equity. "While the percentage of funds outperforming their benchmark in 2015 has doubled in the equity space from 24% to 54%, the results for fixed income are stable at an average of 27% in 2015 and 2014."

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