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 %|
|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.
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