ETF more than doubles returns of active US funds over 10 years

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The Powershares EQQQ Nasdaq-100 UCITS ETF has delivered double the returns of the average active US equity fund becoming the top fund in the sector over a 10-year period, analysis from BMO Global Asset Management shows.

The £1bn ETF has delivered 364.6 per cent over the last 10 years compared to 160.7 per cent for the average active fund in the Lipper Global Equity US sector. The average passive fund in the sector returned 204.6 per cent.

Findlay Park American topped the active funds delivering 279.2 per cent over the last decade.

The Powershares ETF outperformed all other funds in the analysis, which covered passive and active UK registered products in the UK, Asia, Europe, Japan and global emerging markets, as well as sterling bond funds.

Paul Green, investment manager in the multi-manager team at BMO GAM, says over 58 per cent of the Nasdaq 100 is tech and the FAANG stocks are also well represented (Facebook, Apple Amazon, Netflix & Google), which would have been a key driver of the PowerShares ETF’s strong returns.

Tech stock overweights have helped deliver a rare winning streak for US large-cap active managers this year with the majority outperforming their benchmarks.

Apple, Microsoft, Amazon, Facebook and Alphabet are the top five largest holdings in the ETF, which more recently has returned 11.3 per cent over the last six months and 30.6 per cent over the last year.

Active delivers in other regions

All other categories analysed by BMO GAM were topped by an active fund, but Europe was the only region where the average active fund notably outperformed the average passive alternative returning 74.8 per cent over 10-years compared to 64.5 per cent.

UK active equity funds delivered an average 60.6 per cent over 10 years compared to 58.4 per cent in passives, while Japan active funds only just managed to outperform their passive alternatives delivering 60.5 per cent compared to 60.1 per cent.

In all other sectors the average passive fund outperformed active alternatives. In GEM and sterling bond funds outperformance was over 25 per cent.

GEM passive funds delivered 80.8 per cent over the period compared to 63.7 per cent for the average active fund, while passive £ bond funds returned 75.7 per cent compared to 60.3 per cent for the average active alternative.

However, performance varied across active managers with the top funds delivering three times the index benchmark over 10 years.

In the UK, for example, MGM Slater Growth has returned 224.9 per cent compared to 71.8 per cent in the FTSE All Share.

Best funds for Lipper Global sectors

Source: BMO Global Asset Management/Lipper

UK equity:

  • Best: MFM Slater Growth
  • Best Passive: HSBC FTSE 250 Index
  • Index: FTSE All-Share

Asia equity:

  • Best: Stewart Investors Asia Pacific Sustainability Fund
  • Best Passive: BCIF Pacific Ex Japan Equity Tracker
  • Index: FTSE World Asia Pacific ex Japan

Europe equity:

  • Best: Stonehage Fleming European All Cap Equity
  • Best Passive: HSBC European Index
  • Index: FTSE World Europe ex UK

US equity:

  • Best: PowerShares EQQQ Nasdaq-100 UCITS ETF
  • Best Passive: PowerShares EQQQ Nasdaq-100 UCITS ETF
  • Index: S&P 500

JAPAN:

  • Best: Legg Mason IF Japan Equity
  • Best Passive: Royal London Japan Tracker
  • Index: FTSE Japan

GEM:

  • Best: Stewart Investors Global Emerging Market Leaders
  • Best Passive: iShares MSCI EM UCITS ETF USD
  • Index: MSCI EM (Emerging Markets)

£ Credit:

  • Best: PIMCO GIS UK Long Term Corporate Bond
  • Best Passive: BlackRock UK Credit Bond Index
  • Index: Markit iBoxx Sterling Non Gilts Overall