Q1 2024 Active Management Review: Momentum and Growth Factors Outperform

Executive summary:

  • The first quarter was a more favorable environment for active managers in U.S. Large Cap, U.S. Small Cap, Emerging Markets, the UK, Europe, Australia, Canada, Long/Short and Global Real Estate, while being more challenging for Global, Global ex-U.S., Japan and Listed Infrastructure managers.
  • The Momentum factor was the standout performer across all regions, with the Growth factor also outperforming.
  • Bolstered by AI, the information technology sector outperformed most markets during the quarter, with energy and financials also performing relatively well. Meanwhile, the real estate, utilities, consumer staples and materials sectors underperformed across most markets.

Another strong quarter in markets led to another stellar performance for the Momentum and Growth factors.

The first quarter of 2024 picked up where the final quarter of 2023 left off, with most markets finishing in positive absolute territory as inflation continued to moderate, suggesting that a more favorable environment for growth could unfold later this year if central banks begin trimming interest rates. This narrative helped drive outperformance in the Momentum and Growth factors, with Momentum the standout performer across all regions. Other than in the U.S., Value also outperformed, but to a lower extent.

In this risk-on environment, Low Volatility was the worst performing factor, with Quality also lagging across most regions. In addition, Small Caps fared worse than Large Caps during the quarter.