RussellCanadian Active Manager Report Highlights
Median large cap manager more than 6% ahead of the S&P/TSX Composite Index return in 2013
Dividend managers led in the fourth quarter and for the year
2014 not starting off as strongly for Canadian active managers
"The strong environment for large cap managers in
The year ended on a positive note, with 86% of large cap managers beating the benchmark in the fourth quarter of 2013. That followed 74% in the third quarter, 95% in the second and 79% in the first quarter. The median large cap return was 8.4% in the fourth quarter of 2013, which was well above the S&P/TSX Composite Index's return of 7.3%.
The Russell Canadian Active Manager Report is produced quarterly and is based on recently released data from more than 140 Canadian institutional equity manager products.
What benefited managers for the year overall was positive sector breadth, with eight out of 10 sectors beating the benchmark; the most breadth since 2001. "Investment managers were also helped by the decline in gold stocks in the year," highlights Wylie. Gold stocks fell 44% in 2013 and large cap managers in
"Gold stock performance has been a problem for active managers in the past, particularly in 2011, when their weight reached a peak of 14% and active managers were roughly 6% underweight the stocks," explains Wylie. "Managers were significantly underweight gold stocks back then since they were such a large weight in the Index so when the stocks spiked, it would have a big negative impact on their benchmark-relative performance."
Dividend managers lead the quarter and for the year
All styles of large managers beat the benchmark for the year, but dividend managers led the way. They were helped by having the largest underweight to gold stocks. As well, they also benefited from the strong performance of Financial stocks last year since they have an overweight position. The median dividend manager return for the year was 20.6%, over 7% ahead of the S&P/TSX Composite Index's return of 13.0%. Differences between value and growth managers for the year were nominal with growth managers 7.1% ahead of the benchmark and value managers 7.0% ahead.
In the fourth quarter, dividend managers pulled ahead with 93% beating the benchmark and a median return of 8.9% compared to the benchmark return of 7.3%. That compares to 83% of growth and 81% of value managers beating the S&P/TSX Composite Index's return. Dividend managers were helped in the quarter by being overweight Financials and more underweight gold stocks compared to other investment styles. On average, dividend managers were 4.4% underweight gold stocks at the start of the fourth quarter compared to value managers who were 3.2% underweight and growth managers who were 2.7% underweight on average. Gold stocks fell 9.8% in the fourth quarter alone so that helped dividend managers the most. Of the 10 largest negative contributing stocks, six of them were gold stocks.
The strength in the banks was also a key contributor for dividend managers who tend to hold them more broadly than value and growth managers. The top contributing stock in the fourth quarter was
Year not starting on a great note
More than halfway into the first quarter, it looks like the environment has become challenging for large cap managers in
Although the environment is not as favourable so far in 2014, active management has added value for three consecutive years in
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About Russell Investments
Russell Investments (Russell) is a global asset manager and one of only a few firms that offers actively managed multi-asset portfolios and services that include advice, investments and implementation. Working with institutional investors, financial advisors and individuals, Russell's core capabilities extend across capital market insights, manager research, portfolio construction, portfolio implementation and indexes.
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Unless otherwise stated all index data is sourced from ©BNY Mellon Asset Servicing. All rights reserved.
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