Tags: active | fund | managers | normal

Active Fund Managers Improve Their Performance

Wednesday, 17 Jul 2013 10:42 AM

By Dan Weil

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While active stock fund managers generally don't outperform their benchmark indexes, the managers' performance improved in the second quarter, benefiting from market volatility in May and June.

During the second quarter, 45 percent of active fund managers, including hedge funds, outperformed the Russell 1000 Index of large-cap stocks, according to Bank of America.

That represented the best performance for active managers in years, topping the 27-percent beat rate of the first quarter and the 32-percent rate of 2012, CNBC reports.

Editor's Note:
This Wasn’t an Accident — Experts Testify on Financial Meltdown

Turbulence came to the stock market in May and June amid comments from Federal Reserve Chairman Ben Bernanke that the Fed may taper its quantitative easing this year.

The more normal monetary policy that would come from a tapering would benefit active managers, experts say.

"As things begin to normalize a bit, correlations not only among asset classes but also among stocks and sectors are declining, giving active managers a better opportunity to prove their worth," Gary Flam, a portfolio manager at Bel Air Investment Advisors, tells CNBC.

Some experts see continuing improvement for active stocks managers amid continued normalization of monetary policy.

This normalization could lead to more market volatility, and that condition provides a leg up for active managers, says Brian Frank, president of Frank Capital Partners.

"Most active managers exist to take advantage when market volatility creates price action wildly different from underlying business health," he writes in Investment News.

"Changes in markets are often volatile and violent. Passive investors claiming the ability to 'pull the plug' at the sight of trouble may be shocked by the speed a distorted market can correct."

Editor's Note: This Wasn’t an Accident — Experts Testify on Financial Meltdown

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