Capital Markets: Winter 2019

​ Performance

Has Active Relative Performance Troughed?

• As some of those factors reverse, active management, particularly Growth, has been doing better ‒ Interest rates no longer falling ‒ Market performance more subdued

• Powerful cyclical factors impact U.S. active relative performance: ‒ Interest rates/bond-like equities ‒ Small cap performance

‒ Overall market performance ‒ Non-U.S. stock performance

% of U.S. Active Managers Outperforming 2018

Active Relative Performance Is Cyclical

100%

Large Small

84%

80%

60%

59%

40%

32%

24%

20% % of Fund Assets Outperforming

0%

Growth

Value

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

2003

2006

2009

2012

2015

2018

Source: Left chart: Nomura/Instinet, Joseph Mezrich and FactSet through 12/31/18. Fund performance is trailing five-year data of U.S. active equity mutual funds in existence for five years or more and part of the growth, growth & income, and income categories based on CRSP codes. Right chart: Bank of America Merrill Lynch U.S. Equity and U.S. Quant Strategy using Lipper data relative to Russell benchmarks through 12/31/18.

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