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BUSINESS Friday 13 September 2019
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Stock-picking fund managers are clawing back. Can it last?

By STAN CHOE blend funds did at least 4
Associated Press percentage points worse
NEW YORK (AP) — Mutual annually versus an index
fund managers are mak- fund than did 1 percent-
ing the most of the shaky age point or better.
stock market, which has Investors have paid close
provided them an oppor- attention to such numbers.
tunity to prove themselves They’ve pulled hundreds
and lure back investors of billions of dollars annu-
who dumped them in re- ally out of actively man-
cent years. aged U.S. stock funds and
Nearly half of all actively plugged roughly the same
managed U.S. stock funds amount into funds that sim-
turned in better returns ply and cheaply track the
than their average index- S&P 500 and other indexes.
fund peer for the 12 months Some areas of the market
through June, according to seem more conducive to
fund tracker Morningstar. active management than
Their success rate of 48% others. Among high-yield
may not sound very impres- bond funds, for example,
sive, but it’s much better the majority of active man-
than the 37% of a year ear- agers have done better
lier. In this Aug. 5, 2019, file photo trader Timothy Nick, right, works on the floor of the New York Stock than index funds over the
That supports the conten- Exchange. last decade. The same
tion that stock-picking fund Associated Press goes for funds that own a
managers do their best And the market has been over the last year. you see is many still fail to mix of small- and mid-cap
work when markets are heading lower more of- But experts caution that produce an outcome that foreign stocks.
shaky because they’re free ten in the last year, often short-term performance investors might have got- Regardless, the best ap-
to avoid risky stocks drag- to only quickly jerk higher figures can be erratic, and ten if they had just picked proach seems to be looking
ging down the S&P 500 and again, as investor fears last year’s pickup in perfor- an average passive fund.” for funds with low expenses.
other broad indexes. Index about a possible recession mance wasn’t enough to Consider funds that invest While their rates of success
funds, on the other hand, wax and wane. The S&P shift the long-term trend, in a mix of large-cap stocks, may not always be better
mimic those indexes’ falls. 500 tumbled nearly 20% in which still shows most stock- which are among the most than a coin flip, they are
These extra returns above late 2018, only to start 2019 picking managers failing to popular investments and nevertheless much higher
index funds — what the in- with its best opening quar- keep up with index funds. often benchmark them- than for more expensive
dustry calls “alpha” — are ter in decades. “Over longer periods of selves against the S&P 500. funds.
what managers hope will Some of the strongest gains time, active managers Just 8% of such actively “Pick your spots and focus
keep investors from panick- in relative performance have had a hard time sur- managed funds beat their on costs,” Morningstar’s
ing and selling their stock recently have come from viving,” said Ben Johnson, index-fund peers over the Johnson suggested. “In
funds when prices fall. managers of funds that global director of pas- last decade. fixed income and foreign
“The unfortunate reality is focus on smaller and mid- sive strategies research at The penalty for picking the stocks, you’re more likely
that active managers tend sized stocks. They likely Morningstar. “The ones that wrong active fund is also to find a winner, especially
to add alpha when the benefited by steering away die off tend to be funds often bigger than the po- if you focus on cheaper
market is heading lower,” from the smallest stocks, that are not performing tential reward. Over the funds, and the shortcom-
said Steven DeSanctis, eq- which have struggled very well. But even among last decade, more actively ings of picking a loser are
uity strategist at Jefferies. much more than big stocks the remaining ones, what managed U.S. large-cap less dramatic.”q

US long-term mortgage rates rise, with 30-year at 3.56%

Associated Press term mortgage rates. Wednesday that it will ex-
WASHINGTON (AP) — U.S. The trade concerns have empt U.S. industrial grease
long-term mortgage rates appeared to ease in re- and some other imports
rose this week but re- cent days and sentiment from tariff increases, though
mained at historically low has brightened in global it kept in place penalties on
levels. stock markets. Interest rates soybeans and other major
Mortgage buyer Freddie on government bonds U.S. exports ahead of ne-
Mac said Thursday the have ticked up. China said gotiations next month.q
rate on the 30-year, fixed-
rate mortgage increased
to 3.56% from 3.49% last
week. Average rates on
the benchmark loan have
remained below 3.6% for
four straight weeks — the In this Sept. 3, 2019, photo a sign rests in front of a newly
first time that’s happened constructed home, in Westwood, Mass.
since the fourth quarter of Associated Press
2016.The average rate for over the summer as a slow- est rates on government
15-year, fixed-rate home ing global economy and bonds to tumble. The yields
loans rose to 3.09% from 3% tensions from the trade on government bonds, es-
last week. war between the U.S. and pecially the 10-year Trea-
Mortgage rates fell sharply China have caused inter- sury note, influence long-