The State of SMA's

Where do SMA's stand in Q1 and Q2 2024?
There is a common perception in the investment world that active managers have an advantage over passive managers during times of increased volatility, since active managers can go on the defensive, whereas passive managers have strict mandates to mimic an index.
After an extended time period (2012 – 2019) where equity volatility, measured by the CBOE VIX index, traded below its 20-year average of 20.1, volatility increased during the peak of the pandemic. After a bout of low volatility in 2021, volatility surged above its 20-year average in 2022. However, equity volatility fell below its 20-year average and remained there throughout the first quarter (figure 1).
Despite the ongoing uncertainties about monetary policies and the pace of monetary easing, the S&P 500 index posted a +10.56% return during the quarter, which corresponds to the fall in volatility. With the lower volatility and strong equity market performance, let’s take a look at how actively managed separately managed accounts (SMA) fared against their passively managed counterparts during the quarter.
As you can see in the Zephyr graph below, U.S. actively managed equity SMAs fared well during the quarter. The mid-cap growth and small-cap growth styles were the only equity styles that saw an advantage for passive SMAs, albeit a small advantage, with just under 50% of the active managers beating their respective benchmarks.