Capital Markets: Observations & Insights

Performance

Has Active Relative Performance Troughed?

• While there are secular pressures affecting U.S. active management, cyclical factors tend to be much more powerful in the short term, such as ‒ interest rates/bond-like equities ‒ small cap performance

‒ overall market performance ‒ non-U.S. stock performance

Active Relative Performance Is Cyclical

54% of large cap managers have outperformed their style benchmark year-to-date

100%

80%

60%

40%

20%

% of Fund Assets Outperforming

0%

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

Source: Nomura/Instinet, Joseph Mezrich and FactSet through 9/30/17. Fund performance is trailing 5-year data. Year-to-date active performance from Bank of America Merrill Lynch.

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