Active U.S. Equity Funds During the COVID-19 Crisis: Performance and Flows
Summary
This review summarizes research on U.S. actively managed equity mutual funds during the acute COVID-19 market crisis. The study compares net fund returns with broad-market, style-matched, prospectus, and factor-model benchmarks, and examines investor flows using daily data. Across these comparisons, the average active fund underperformed its benchmarks. Funds with higher sustainability and Morningstar star ratings performed better, while growth funds tended to outperform value funds after style adjustment.
Active funds experienced net outflows during the crisis, but the pace was not statistically distinct from their longer-run trend. Higher-sustainability funds attracted relatively more flows, particularly those with stronger environmental scores. The authors also find weak, statistically unreliable evidence that less liquid small-cap funds faced greater outflows. Results concern a short, exceptional period in 2020 and a defined sample of U.S. funds; they do not establish that sustainability ratings or past star ratings will predict performance in other crises or market regimes.
Key ideas
- Active U.S. equity mutual funds underperformed broad and style-adjusted benchmarks during the studied crisis window.
- Higher sustainability and Morningstar star ratings were associated with stronger crisis-period performance.
- Growth funds tended to outperform value funds after accounting for investment style.
- Fund outflows accelerated during the market decline but were not significantly different from their longer-term pattern.
- Higher-sustainability funds received relatively stronger flows, especially those with better environmental scores.
- Evidence linking small-cap fund illiquidity to greater outflows was not statistically reliable.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.