Statistical news focuses on the latest figures and trends in Danmarks Nationalbank’s statistics. Statistical news is targeted at people who want quick insight into current financial data.
Close to the same return in active and passive funds
In the 1st quarter of 2023, Danish households received a return of 5.2 per cent before costs in funds that invest in global equities. There was a small difference in returns for active and passive management. The return was 5.1 per cent in actively managed funds, while it was 5.6 per cent in passively managed.
Positive returns in the 1st quarter of the year with little variance across funds. Note: Time-weighted returns before costs on Danish households’ wealth in equity funds, which have at least 80 per cent exposure in global equities. Gray dots indicate returns in management companies. Data covers Danish investment funds, regulated by the Danish Investment Associations etc. Act (i.e., UCITS). Find chart data here (link).
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In the 1st quarter of 2023, Danish households received a return of 5.2 per cent before costs in funds that invest in global equities. There was a small difference in returns for active and passive management. The return was 5.1 per cent in actively managed funds, while it was 5.6 per cent in passively managed.
Global equity funds typically have a benchmark for global equities such as the market index MSCI World. Global funds are the most popular equity funds among Danish households and with kr. 143 billion they account for around three quarters of the total wealth of households in equity funds.
Most of the wealth in global equity funds are actively managed, while 17 per cent is passively managed. Inflows into the passive funds have increased since the start of 2018, where only 7 per cent were passively manged. In passive funds, the returns follow the returns of the chosen benchmarks, because the investments are composed such that they match the underlying market index. In active funds, on the other hand, the aim is to achieve higher returns than the benchmarks, and therefore investments and returns will differ from those of the market indices.
Active managers can adjust the investments
Active managers can adjust the composition of the investments such that it differs from the composition of their chosen benchmark. In other words, the managers can change the weighting of individual investments in their portfolios. Active managers’ option to change the weights give a larger variance in returns across actively managed funds compared to the passively managed, because the active managers can have different strategies. For example, at the end of 2022, active managers had a higher weighting of Novo Nordisk and a lower weighting of Tesla compared to passive managers, which are two stocks that had very different returns in 2022.
Higher costs with active management
Depending on the type of management, there is a difference in costs: The annual costs percentage is typically 1.5 per cent in actively managed funds, while it is 0.5 per cent in passively managed with the largest variance in costs in actively managed funds.