An InterSec news release said the managers’ results ranged from -2.8% to +3.1%. The median manager performance for 2004 through the end of September was 3.8% versus the MSCI EAFE index of 4.3%. This is only the third quarter in the past eight where the median manager has beaten the index, keeping the two-year relative performance in the red, according to the announcement.
The quarterly outperformance came mainly from manager’s Europe investments where stock selection allowed portfolios to rally against the local indices. Managers also benefited from a continued underweighting to the Japanese market which fell 7.5% in the quarter (the median manager is 2.5% below the market allocation weight in Japan). On the down side, managers continued to underperform within the Japanese market, with the median manager result falling another 1% below the already negative returns, InterSec said.
Additionally, many managers found it difficult to match the relatively strong markets in the United Kingdom (up 2.7% for the quarter) where the median manager underperformed by 1.6%.
The median manager in InterSec’s peer group of emerging markets equity portfolio also outperformed the mandate benchmark returning 8.3% for the third quarter, bringing the year-to-date results up to match the index return of 7.2% through the end of September, according to the announcement. The positive results came in large part from underweightings in the Middle East, especially Israel, and overweightings in Latin American markets such as Brazil.
Still, managers had a difficult time within Latin America keeping up with markets that were up over 26% in three months in the case of both Brazil and Argentina.