International Equity Managers Post 2 Years of Above Index Returns

The majority of active international equity investment managers posted their second consecutive calendar year of above index returns despite the MSCI EAFE benchmark index soaring 26.3%, according to a new report.
An InterSec Research news release said that the active managers’ outperformance, gross of fees at a median level, was narrow with a return of 26.6%. The company said the data is based on preliminary results from InterSec Research’s peer group performance universe of more than 135 unique institutional international equity products.

Meanwhile, in 2006, EAFE Value managers continued to outperform EAFE Growth managers, largely from relative outperformance in the Japan stock market. Japanese equities provided a drag for most managers as it was the only international developed country stock market in 2006 to not post a double-digit return. Currency, on the other hand, provided a strong boost for managers across the board.

The trailing three-year time frame also shows the majority of managers besting the benchmark index with a return of 20.7% versus 19.9% for MSCI EAFE with a range of active portfolios from 17.7% to 25.5%, according to InterSec.

According to the report, active managers of emerging markets portfolios delivered strong absolute returns but struggled when it came to matching the benchmark index performance. The preliminary results of the median manager in the InterSec Research peer group of institutional emerging markets equity products returned 31.3% for 2006 compared to the MSCI EM index return of 32.2%.

The three-year median return of the peer group, on a preliminary basis, is 31.3% versus 30.5% for the MSCI EM benchmark index. The majority of investment managers in the InterSec GEM peer group performance universe have outperformed in every three-year calendar period since InterSec began tracking their performance in 1996, according to the announcement.