Introduction

With dramatic developments unfolding in equity markets, asset allocators are closely scrutinizing the performance of their active managers. Moreover, eyes already turn towards larger strategic questions. While long-term investors should of course pursue a disciplined and consistent approach, periods of substantial upheaval often provoke a re-evaluation of portfolio construction, strategy and risk management. Indeed, subjects such as factor exposure and market concentration were already top-of mind as we headed into the year.

With these concerns and challenges in mind, this edition of Market Review examines US active manager relative performance to see how the characteristics of ‘winners and losers’ shifted within the first few weeks of the still-continuing downturn now becoming colloquially known as the ‘Trump Slump’.

Key takeaways:

• Top quintile’ manager performance relative to the market declined dramatically on a three-year basis, falling from around 2% above benchmark per annum to 0.18% (net of fees). The same, interestingly, was not true of the bottom quintile — whose relative performance was largely unaffected.
• The composition of the top quintile did also change somewhat: 81% of the strategies that were in this group in late-February remained (on a three-year basis) in mid-March.
• While the overall risk factor profile of the top and bottom performers retained a similar pattern, the relevant tilts became weaker, and performance attribution analysis tells a similar story.
• There was also a notable change in terms of diversification in winners’ portfolios, with the ‘Effective Number of Stocks’ (ENS) in top quintile managers’ portfolios increasing from 23.8 to 29.3 and the ‘Effective Number of Industries/Sectors’ increasing from 2.4 to 3.0.

The picture continues to evolve, with a further and deeper drawdown occurring in April 2025. As such, the conclusions remain under continual review. In the meantime, investors can keep an eye on the specific exposures and characteristics of their own equity managers and portfolios on the Scientific Portfolio Platform.

Authors

Matteo Bagnara, PhD
Quant Researcher,
Scientific Portfolio ……………………………………….
…
….

Shahyar Safaee
Deputy CEO and Business Development Director,
Scientific Portfolio

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