How Stockpickers Steer Through Storms

The bear market has made active managers look good—so far

- Pat Regnier

For one type of investor, 2022 was the best year in a long time. A large number of active managers of equity mutual funds—the ones who select specific stocks rather than track an index—beat the S&P 500.

Measuring the relative performance of fund managers is trickier than it sounds, so not all the data are in. (Number crunchers have to decide which index each fund can be fairly compared with.) But early indications show that a key group of stockpickers eked out an edge. According to an analysis by advisory company Strategas Securities, 62% of active large-company “core” funds—those that buy a mix of growth and value stocks—beat the market. That’s the highest percentage of active portfolios to notch a win since 2005.

Similarly, an analysis by S&P Dow Jones Indices, which compiles a widely followed scorecard of active versus passive funds, showed that almost half of a broader universe of large-cap active funds topped their benchmark in the first half of 2022, compared with a long-run average of only 35%. Final 2022 figures are still in the works, but “if the whole year came out that way, it wouldn’t shock me,” says Craig Lazzara, managing director of core product management at S&P DJI. Most managers still lost money, but as the S&P 500 index tumbled almost 20% last year, a lot of them found ways to at least limit the damage.

This development seems to affirm a favorite marketing line of fund companies: When times get tough, active management shines. Even a 50-year proponent of index investing, Princeton emeritus professor of economics and