This truly is a stock picker’s market. Why your fund manager still can’t beat the index

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Fewer than one in five actively traded investment funds in the U.S. managed to beat the S&P 500 index in the first half of the year

The Toronto Stock Exchange in Toronto on Nov. 1, 2023. Only one in four Canadian active fund managers focused on U.S. stock picks have outperformed the market.The investment industry is perpetually claiming that the moment has arrived for active investment strategies to carry the day over low-cost index funds.

consistently on the rise of late, the individual stocks that make up the market are doing their own thing. An index of implied correlation from options exchange Cboe, for example, hit a record low last week. This is true over virtually any time frame. Widen the lens out to a decade – a long-enough stretch for any stock picker to prove their mettle – and the results are similar.

“We have millions of people trading trillions of dollars long and short, 24 hours a day,” Mr. Shaunessy said. “The idea that somebody sitting in Toronto or Vancouver is going to be able to pick a stock based on something that no one else knows is highly unlikely.” But if there are times that are more conducive to stock picking, then the opposite must also be true.

 

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