Indexes Regain Edge Over Active

December 15, 2010

Most actively managed U.S. equity mutual funds underperformed their benchmarks in the first half of this year, according to the latest Standard & Poor’s Indices Versus Active Funds Scorecard.

The SPIVA report, covering the 12 months ended June 30, marks a departure from the last report, when many active investors fared better than their benchmarks at a time of upheaval following the market crash of 2008-2009.

The new report shows 56 percent of managers failed to beat their benchmarks, re-establishing the historical trend. Active management has consistently underperformed in most stock and bond asset classes for the better part of the last decade. Apart from 2009, the last year active management fared better was in 2000, when 40.5 percent of managers failed to beat their indexes, versus 2009’s 41.67 percent.

The data show that the percentage of equity managers besting their benchmarks over the last year is largely in line with historical averages over one-, three- and five-year figures.

Active bond managers fared a bit better than their counterparts in equities in the past year. The most shining examples were managers of short- and intermediate-term government securities, about 60 percent of whom outperformed their respective benchmarks in the 12 months ended June 30. However, those bright spots of outperformance completely disappeared in the three- and five-year time frames, according to the S&P report.


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