Fund buyers cut US passive exposure after beta run

Fund buyers are selling their US passive holdings and buying into high conviction stockpickers as correlations in the market subside from historic highs.

Active US equity fund managers have suffered a torrid time over the past three years, largely failing to keep up with a quantitative easing-fuelled rally in US equities. The S&P 500 has returned 49.7% in the three years to 2 December, according to Morningstar, while the average active fund in the IMA North America sector returned just 39.8% over the same period. However, over one year the sector is broadly in line with the S&P 500, and buyers - who have long favoured passive funds for their US exposure - are now backing active funds to pull ahead once the US Federal Reserve tapers its...