Active managers have outperformed passive indexing over the last 20 years, with highest excess returns during years of elevated volatility, according to a new study published by AMG.

Their new study, in part demonstrates that active managers - boutiques and non-boutiques - meaningfully outperformed passive indexing in periods of elevated volatility. AMG’s proprietary study of institutional equity strategy returns and market volatility data for the trailing 20-year period ended December 31, 2019 demonstrates that independent boutique managers and non-boutiques generated additional value for clients, relative to indices during periods of elevated volatility.

While data has yet to become available with respect to current, COVID 19-related volatility, it’s reasonable to assume that boutique and non-boutique active managers could be poised to outperform their passive indexing counterparts yet again.

AMG writes, the dispersion of excess returns across all levels of heightened volatility suggests that extreme market disruption is not the only environment in which active managers generate alpha. In fact, any above-average levels of volatility provided greater asset dispersion and enhanced opportunities for the best active managers to generate outperformance.

During periods of high volatility, which are typically accompanied by higher dispersion of asset returns, skilled active managers have been able to discern the most significant alpha generation opportunities and distinguish themselves. A look at average returns over periods of heightened volatility levels demonstrates much higher levels of dispersion between boutiques, non-boutiques, and index returns. Boutique average gross returns exceeded average index returns, with independent boutiques returning 6.5%, while non-boutiques and passive indexing returned 5.3% and 3.2% respectively. [Figure 4]