Performance of Active vs. Passive Investments in the Nordic countries during COVID-19

Abstract

For many years, active vs. passive investing has been studied to determine which strategy generates the best returns for investors. Both strategies have their advocates and opponents. Meanwhile, active managers intend to outperform the market, passive investors adopt a “buy and hold” strategy.

During the recent COVID-19 pandemic, the stock market experienced high volatility and changes that could test if the buy and hold strategy could produce better results than the active investment strategy. Alternatively, on the other side, if actively managed, investments can take advantage of their flexibility and adapt to the changes and succeed by outperforming the market. This thesis report aims to study the performance of active vs. passive investments in the Nordic countries during the Covid-19 pandemic two-year period. For this study, a sample of 40 actively managed open-end funds from the Nordic countries was taken and compared against the highest trading index by countries, the OMX Indexes. The S&P Country BMI was used as well as an additional index benchmark for analysis. The best and worst actively managed portfolio funds by country during the two-year period were analyzed in closer detail, taking a look into the performance of each mutual fund against the OMX country Index.

The study was performed as quantitative research with secondary data extracted from investment databases, and for its analysis, it was used descriptive statistics, regression analysis, and different performance ratios to reach comprehensive results and further conclusions.

The analysis relied on the theoretical framework studied, understanding the described investment theories, performance ratios measurement significance, and lastly, the effect of COVID-19 on investments. It was found that only two actively managed portfolios were able to outperform the market during the pandemic of the four Nordic countries. In Sweden and Norway, the selected sample's active mutual funds outperformed both selected indexes. In, the opposite the Danish OMXC20 and Finnish OMHEX25, shown to be a better decision to invest during the two year period than the actively managed funds portfolio.