- The third quarter was a more favorable environment for active managers in U.S. Large and Small Caps, Japan, Australia, and Canada equities, while being more challenging for Global, Global ex-U.S., Emerging Markets, Europe, UK and Long/Short managers.
- The Value factor dominated returns across all regions, while Growth was the worst performing factor.
- The energy sector was the best-performing sector for equity managers, generating meaningful positive returns across all regions.
The debate over Value stocks versus Growth stocks has raged for the better part of the last decade among investors, especially due to Growth’s unprecedented run since the Global Financial Crisis (GFC). This was not the case during a volatile third quarter, however, as the Value factor dominated returns among active managers across all regions. On the contrary, Growth was the worst performing factor. Quality provided defensiveness in the U.S. market, while Low Volatility offered better downside protection in other markets outside of the U.S.
On balance, the third quarter proved to be a more favorable environment for active managers in U.S. Large and Small Caps, Japan, Australia, and Canada equities, while being more challenging for Global, Global ex-U.S., Emerging Markets, Europe, UK and Long/Short managers. The volatility of the quarter meant that divergence in country, style and sector returns all impacted managers’ index-relative returns, with stock selection also being key.
Sector-wise, energy was by far the best performing sector, generating meaningful positive returns across all regions. Financials also outperformed in most markets, although to a lower degree. This dynamic supported the outperformance of Value during the period. Conversely, utilities and consumer staples were among the weakest sectors across markets. Information technology, which had previously benefited from the generative AI (artificial intelligence) theme throughout most of the year, also underperformed.
At Russell Investments, our unique relationship with specialist managers affords us the latest active management insights. Here are the key takeaways in third-quarter active management performance from our manager research team.