Standard & Poor’s has just released its mid-year Index vs Active Fund Scorecard (SPIVA), which measures active funds against their passive index benchmarks. And whereas the last SPIVA was rather unequivocal in its findings, this one is a bit more ambiguous.
From S&P’s press release:
New York, August 20, 2009- Standard & Poor’s Index Services released today the mid-year 2009 results for its Standard & Poor’s Index Versus Active Fund Scorecard (SPIVA). The SPIVA Scorecard is produced semi-annually, and can be accessed in its entirety at: www.spiva.standardandpoors.com.
For the five-year period ending June 30, 2009, the SPIVA scorecard shows that the S&P 500 outperformed 62.9% of actively managed large cap funds, the S&P MidCap 400 outperformed 73.4% of mid cap funds, and the S&P SmallCap 600 outperformed 57.4% of small cap funds. However, asset weighted averages suggest a more level playing field, with active managers level or ahead of benchmarks in most categories except mid-caps and emerging markets.
“Our latest five-year data for equity funds can be interpreted favorably by proponents of both active and passive management,” notes Srikant Dash, Global Head of Research & Design at Standard & Poor’s and author of the report. “Passive management believers can point out that indices have outperformed a majority of active fund managers across all major domestic and international equity categories; with real estate being the lone exception. Conversely, proponents of active fund management can point to the asset weighted averages.”
The full report, with details of the asset-weighted methodology, is available here.
Suffice to say, on a risk-weighted basis fund managers’ performance looks considerably more skilled — though not stellar. For instance, while the S&P Composite 1500 fell by 26.34 per cent over the past year, domestic funds fell by 26.07 per cent on an asset-weighted basis.
Interestingly, however, the five-year performance for fixed income funds is the least equivocal vague result of the bunch — on both an equal and asset-weighted basis:
The five-year data is unequivocal for fixed income funds. Across all categories except emerging market debt, more than three-fourths of active managers have failed to beat fixed income benchmarks. Similarly, five-year asset weighted average returns are lower for active funds in all but two categories.
Related links:
The management myth – FT Alphaville