Index trackers likely to lag

Research from Isis Asset Management shows that over the past five years index trackers were twice as likely to have underperformed the UK All Companies sector as active funds. The group found that 83% of index funds are clustered in the third and fourth quartile over one year, 71% are in the bottom half over three years and 84% over five years. Returns from actively managed funds are more evenly distributed. Isis has found that some of this underperformance is derived from tracker funds’ exposure to large-caps, which underperformed in 2003.