A staggering 95% of UK blue-chip and mid-cap funds have failed to beat the stock market over three years, as the impact of the 2016 Brexit vote continues to take its toll.
The UK stock market is revealed as a standout area of undeperformance for active fund managers in the latest report from S&P Dow Jones pitting European manager against its indices.
Over three years, only the performance of managers against the Dutch and Polish stock markets was worse, with 100% and 98% underperformance respectively.
S&P pitted UK large- and mid-cap managers against its S&P United Kingdom LargeMidCap index, composed of FTSE 100 and FTSE 250 stocks.
Andrew Innes, associate director at S&P Dow Jones Indices, said the ‘most notable period of underperformance’ in the past three years was in June 2016, the month of the Brexit referendum.
‘The asset-weighted performance of the fund category underperformed the [index] by 6.9% in June 2016 alone,’ he said.
‘This created a base from which very few funds were able to recover from even three years later.’
Innes argued UK funds suffered from their 'inherent small cap bias', as smaller companies more reliant on the UK economy for their earnings were hit harder by the vote, denied the boost to overseas earnings from the pound's fall that buoyed more internationally-focused blue-chips.
Yet lower down the UK stock market, fund managers have done far better. More than six in 10 UK small-cap managers outperformed S&P's small-cap index over three years, the best ratio barring Denmark's stock market in the index provider's survey.
S&P examines the average performance of active funds by weighting them according to their size. To correct for 'survvorship bias', it includes all funds available at the start of the period surveyed, even those that are closed during the period.