Australian active managers have had a horror run this year, wrong-footed by a relentless rally in the ASX’s biggest companies that has left the industry on track to record its highest rate of underperformance in almost a decade.
About three in four, or 78 per cent, actively managed Australian equity funds lagged the S&P/ASX 200 Index in the first six months of the year, with the average portfolio returning just 0.2 per cent compared to 2.4 per cent return for the benchmark, according to S&P Dow Jones Indices.
That places the industry on track for its worst rate of underperformance since 2018, when a shocking 87 per cent of actively managed funds trailed the market and is the second-highest reading since S&P Dow Jones Indices started tracking the data in 2013.
“If funds keep underperforming by 20 per cent, that will be a quick road to investors moving elsewhere, leading to outflows and placing more pressure on the business,” warned Morningstar’s director of manager research, Matt Olsen.
“While some managers might survive shorter term periods of underperformance, if it persists, it will be very hard for them.”
Just last week, Australian Unity was forced to close Platypus Asset Management following a horror stretch of performance. The Sydney-based manager’s flagship Australian equities fund had lagged the ASX 300 Accumulation Index by 22.9 per cent in the year ending July 31.
“This environment should be favourable for those that try to pick stocks and differentiates themselves from average index performance,” said Sue Lee, S&P Dow Jones Indices’ head of index investment strategy, citing dispersion among sectors on the ASX and volatile trading in individual stocks.
In the first half of 2026, the mining and energy sectors posted double-digit gains while healthcare and technology stocks fell 22 per cent and 16 per cent, respectively.
Making it more difficult for stock pickers has been the wave of money that has crowded into the perceived safety of the ASX’s biggest and most liquid stocks because of the conflict in the Middle East. That trend has been turbocharged by the growing influence of passive and momentum investors that continue to chase the sharemarket’s blue chips.
The surge has meant that the 20 biggest companies now make up a combined 63.4 per cent of the ASX 200, up from 61 per cent at the start of the year and near the highest level in more than a decade.
“The high concentration means that active managers’ relative portfolios can be heavily affected by their positioning in just one or two stocks,” said Lee, adding that there were also structural reasons for funds’ underperformance.
“The market is becoming more professionalised, competition is stronger, and it’s becoming harder to find opportunities to generate alpha, and those factors aren’t going away any time soon,” she said.
Over a 15-year time frame, 89 per cent of actively managed funds have trailed the ASX.
But arguably the biggest headache for investors this year has been the sharp rotation in market leadership from banks to mining stocks, led by BHP’s 30 per cent rally in the first half.
The mining giant contributed 2.9 per cent to the sharemarket’s return, and has extended its rally as copper prices have surged to record levels.
Meanwhile, growth-focused managers have had to contend with the global rout in software stocks earlier this year, which was then compounded by the three rapid-fire interest rate rises from the Reserve Bank of Australia that hit technology stocks particularly hard.
Source: https://www.afr.com/markets/equity-markets/the-most-active-managers-in-almost-decade-are-trailing-the-asx-20260907-p60v84