Active Management and QE-Distorted Markets

via J.P. Morgan Asset Management

"Any discussion on industry performance needs to start with the unorthodox changes in market conditions resulting from central bank quantitative easing: negative real policy rates across the developed world, $14 trillion of European and Japanese government bonds with negative yields, a collapse in risk premia across asset classes and a number of other distortions. Before getting into the details, start with the first two charts below. Note how the rise in negative yielding government bonds coincided with a deterioration in equity manager outperformance in both US and non-US style categories. The length of the current economic cycle may also partially explain the decline in manager outperformance; the US expansion is now the longest on record, and as shown in the bottom chart, many active managers tend to perform better in “down” markets."

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Active Management and QE-Distorted Markets

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