[LONDON] The failure of equity fund managers to deliver outsize returns commensurate with the fees they charge for their stock-picking services continues to be a source of ammunition for advocates of lower-cost index tracking products. Less scrutinised, although equally dreadful, is the seeming inability of their bond brethren to offer a fixed-income alternative that can generate benchmark-beating performance.

Hence the existential crisis that still threatens the entire active fund management industry. The pandemic, it seems, hasn't changed anything, according to S&P Global's (S&P) Dow Jones Indices Unit's just released update on how the active crowd is doing compared with the benchmarks against which its performance is measured - or, perhaps more accurately, against the index-tracking funds that investors can buy to gain market exposure at a lower cost. Overall, it's not a pretty picture.

In the first half of the year, fewer than a third of US domestic equity fund managers delivered annualised returns that outpaced the S&P Composite 1500 Index. While that's their best - or least-bad - performance compared with longer periods, it still destroys the argument that stock pickers can outperform in volatile markets. It means even amid the pandemic-inspired swings seen in equity prices in recent months, two-thirds were still unable to beat the index.

The fixed-income crowd has done even worse. Less than 10 per cent of active bond portfolio managers outstripped their relevant benchmarks in most debt categories, according to the data compiled by S&P. Even in high-yield securities, the index managed to beat two-thirds of bond managers.

And that's just measured over a one-year period. Extend the analysis over a longer horizon, and the paucity of performance becomes even more apparent.

Those figures for emerging market debt funds are not an error. Precisely none, nada, zero of portfolios focused on emerging markets managed to outpace the relevant Bloomberg Barclays index on a 10 or 15-year basis, the S&P report says. On that longer-term view, fewer than 3 per cent of bond managers in any of the debt categories outperformed their index. For shame.

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I wrote in March that fund managers who'd explained away their lacklustre performance as the result of relentlessly one-way stock indices had a final opportunity to prove their worth, and earn their fees, as volatility returned with a vengeance. After this year's dismal outcome, no one would blame an investor for calling last orders in the last-chance saloon for active management.

BLOOMBERG