It's Not Easy Being Green!

The difficulty of active managers to outperform passive investments has been well-documented over the past several years. Those studies usually look at stock-pickers and not so much at tactical asset allocators. But now, looking at last year’s data from Morningstar, we can see how difficult it is for that class of investment manager.

According to Morningstar, out of the 269 Tactical Allocation funds in that Category, ONLY 2 funds had positive returns in 2018 (were green!). Of course, the S&P 500 was down -4.5% total return in 2018, so being negative isn't necessarily a bad thing. Even then, I only counted 19 funds that beat the S&P!

Tactical allocation managers usually use a combination of short term technical and fundamental methods to guide their fund positioning, such as quant methods, momentum, rich/cheap relative value, etc. This is in contrast to long-term strategic managers that takes into account longer term asset class relationships. But, long term buy-and-hold had a tough year in 2018, too; the iShares Moderate Allocation ETF (AOM) was down -4.0% in 2018. The active versus passive debate continues!

See this link for a complete list of all the funds in that Category:$FOCA$TV.aspx