Active Equity Managers Have Tended to Out-Perform Indexes Early in Recovery

BOSTON, June 29, 2009 — Actively managed equity portfolios have tended to outperform passive investments such as index funds following periods of extreme market distress, and the current market environment potentially has set the stage for out-performance by actively managed mutual funds and institutional funds, according to an analysis by The Boston Company Asset Management Company, LLC (TBCAM), part of BNY Mellon Asset Management.

"These periods of market distress have created wide dispersions within stock valuations," said David A. Daglio, senior vice president and team leader of TBCAM's opportunistic value strategy. "In the past, good stock pickers have been able to take advantage of these dispersions to add value. They were able to buy attractively valued equities, while avoiding less attractive options."

Approximately 64 percent of all equity mutual funds with reportable data have outperformed their benchmarks for the first five months of 2009, according to Lipper Equity Fund Performance Analysis Service, and similar trends have been observed for the early part of 2009 for actively managed institutional funds.

TBCAM, which manages both mutual funds and institutional accounts, noted in its analysis that equity levels are approaching attractive levels last seen in the 1940s. At the same time, the analysis noted that cash-flow yields are at 57-year highs.

"The early part of 2009 appears similar to other periods that we have studied, where market distress has created exceptionally wide valuation spreads across the marketplace," said Daglio. "During these periods, the good stock picker is able to select equities with historically low valuations and where fundamental recovery prospects have been ignored." Other periods that exhibited similar distress included in the TBCAM study were 1974 - 1975, 1990 - 1991, 2001 - 2002 and 2008 - 2009.

"Relative performance for the first five months of 2009 was strongest in the small cap equities asset class, where 70 percent of small cap actively managed portfolios were ahead of their benchmarks," Daglio said.

"Active management allows for the inclusion of the best investment opportunities in the portfolio, while excluding securities that are identified as fundamentally weak or having unattractive valuations that could dilute portfolio returns," said Michael K. Arends, portfolio strategist for the TBCAM opportunistic value team. "We have had good success exploiting these opportunities over the last several months."

Arends added the TBCAM analysis concluded that active managers have been able to beat their indexes for a multi-year period following severe market distress. "Given the severity of the recent market decline and breadth in valuations in most market sectors, we believe that this is an opportunity for good stock pickers to out-perform."

The Boston Company Asset Management, a BNY Mellon Asset Management investment boutique, provides investment management services for corporate, public, mutual funds and Taft-Hartley retirement plans, endowments and foundations.

BNY Mellon Asset Management is the umbrella organization for The Bank of New York Mellon Corporation's affiliated investment management firms and global distribution companies.

The Bank of New York Mellon Corporation is a global financial services company focused on helping clients manage and service their financial assets, operating in 34 countries and serving more than 100 markets. The company is a leading provider of financial services for institutions, corporations and high-net-worth individuals, providing superior asset management and wealth management, asset servicing, issuer services, clearing services and treasury services through a worldwide client-focused team. It has $19.5 trillion in assets under custody and administration, $881 billion in assets under management, services more than $11 trillion in outstanding debt and processes global payments averaging $1.8 trillion per day. Additional information is available at www.bnymellon.com.

Past performance is not predictive of future performance; future performance is not guaranteed. Some information contained herein has been obtained from third party sources that are believed to be reliable, but the information has not been independently verified by TBCAM. TBCAM makes no representations as to the accuracy or the completeness of such information.

All information source BNY Mellon Asset Management as at 31/03/09. This press release is qualified for issuance in the UK and US and is for information purposes only. It does not constitute an offer or solicitation of securities or investment services or an endorsement thereof in any jurisdiction or in any circumstance in which such offer or solicitation is unlawful or not authorized. The views in this press release are those of The Boston Company Asset Management, LLC, may change with the market changes, and do not necessarily represent the views of the BNY Mellon Asset Management organization. This press release is issued by BNY Mellon Asset Management (US) and BNY Mellon Asset Management International Limited (ex-US) to members of the financial press and media and the information contained herein should not be construed as investment advice. Registered office of BNY Mellon Asset Management International: The Bank of New York Mellon Centre, 160 Queen Victoria Street, London, EC4V 4LA. Registered in England no. 1118580.
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