Active Managers and the EAFE Index
2004 was the second consecutive calendar year in which the EAFE index beat the majority of active international equity asset managers (in InterSec’s EAFE Plus universe). 2004 also marked the first 2-year out-performance of the benchmark since the run-up of the Japanese equity bubble in the mid-eighties. This under-performance of active managers comes on the heels of several recent changes made to the EAFE Index. While some are interpreting this coincidence as evidence of the decreasing potency of active management, we at InterSec feel that an examination of a longer history is warranted. Perhaps asking whether the EAFE Index under the new methodology is more difficult to beat is not the right question, but rather have active managers as a whole become too similar to the benchmark to attain significant out-performance?