Simon Molica: The life of a U.K. equity active fund manager was incredibly changing in 2016. The relative performance was extremely weak and I'd go as far to say is one of the worst years if not the worst year I've witnessed within my career.
Now there is many reasons as to why this was. One, the Brexit vote. Sterling weakness certainly supported international type companies; companies that are orientated towards exporting. These are typically the largest companies in the index and an area that many U.K. active fund managers are actually underway.
The second reason I'd point to is the oil price recovery. A sharp recovery in the oil price led to many energy companies outperforming, too, and again another area that U.K. equity managers are well-underway.
The good news is actually 2017, we've seen a much better performance backdrop from these U.K. equity fund managers. And one that's somewhat a reversal of what we've just spoken to, but also I'd highlight dispersions being higher and fundamentals reasserting themselves has been a better market backdrop for bottom-up stocks selectors.
Now the passive/active debate continues as ever and we do a lot of work here in Morningstar. But the one thing I would say is, with fees becoming a little bit lower and also a concentration within the sector group, where actually we can now see within the last couple of years about 10% to 20% of these sector consolidating.
So, fewer U.K. equity managers out there, although there is still a vast number of funds to choose from, but I think going forward what's going to be important is, if you pick an active manager, it needs to be active and it needs to differentiate itself in some way. What that does mean is there will be volatility along your performance profile and that's something I think investors need to understand.
