SPIVA: Passive Trumped Active In 2010

By
Devin Riley
March 08, 2011
Share:

Most active funds were outperformed last year, though small-cap equities kept it close.

 

Most actively managed U.S. equity mutual funds underperformed their benchmarks last year, a typical outcome in the ongoing contest between active and passive investing, according to a report Standard & Poor’s releases twice a year.

The Standard & Poor’s Indices Versus Active Funds Scorecard (SPIVA) showed that large-cap, mid-cap, and small-cap indexes, on average, outperformed active funds by between 1 to 3 percentage points over the year on an asset-weighted basis.

Most strikingly, S&P found that using equal-weighted fund counts, more than 73 percent of mid-cap funds were outperformed by their benchmark. In sum, about half of all domestic equity funds outperformed their indexes on an equal-weighted basis, with small-cap value performing the best.

But, on the whole, the report marks a return to the historic trend of passive equity indexes outperforming their actively managed counterparts. That trend was reversed during the market crash of 2008-2009, during which actively managed funds outperformed passive benchmarks, on average. Apart from 2009, the last year active management fared better than their benchmarks was in 2000, when 59.5 percent of managers beat their indexes. Standard & Poor’s released preliminary 2010 SPIVA data last month.

The percentage of equity managers that were outperformed by their benchmarks last year was largely in line with historical averages over one-, three- and five-year figures, with small-cap managers, as noted above, faring the best of all categories. Just over a half of all small-cap managers were beaten by their index, compared with 70.11 percent and 63.02 percent in the three- and five-year periods, respectively.

Average Performance Of Selected U.S. Equity Funds On Asset-Weighted Basis*

Category 1-Year % 3-Year % 5-Year %
S&P 500 15.05 -2.86 2.29
All Large Cap Funds 13.60 -2.87 2.21
S&P MidCap 400 26.64 3.53 5.74
All MidCap Funds 23.13 0.88 5.02
S&P SmallCap 600 26.32 3.02 4.65
All Small Cap Funds 25.87 2.43 4.71
S&P Composite 1500 16.38 -2.15 2.65
All MultiCap Funds 15.91 -1.78 3.12

*Asset-weighted returns are a better indicator of fund category performance measurement because they more accurately reflect the returns of the total money invested in that particular style category.

 

ETF DAILY DATA

The S&P 500 funds 'SPY' and 'IVV' led inflows on Thursday, Feb. 26, as total U.S.-listed ETF assets dipped to $2.094 trillion

'SPY,' 'MDY, 'XLF' and 'XLY' paced SSgA's issuer-leading inflows on Thursday, Feb. 26, as total U.S.-listed ETF assets fell to $2.094 trillion.

ETF.COM ANALYST BLOGS

By Elisabeth Kashner

Virtu’s mind-bending way to play oil market volatility is a fascinating glimpse into the world of ultra-sophisticated investors.

By Dave Nadig

A reader asks: What happens to ETFs when the market goes nuts?

By Dennis Hudachek

In the growing world of currency-hedged ETFs, Germany strategies are getting short shrift.

By Elisabeth Kashner

A look at ETF.com's powerful revamping of its classification of U.S. total market ETFs.