SPIVA: Passive Managers Shined In 2011

April 05, 2012

Passive funds reaffirmed their historical advantage over active fund managers last year in a big way.


Nearly nine out of 10 actively managed U.S. equity mutual funds underperformed their benchmarks in the past year, an unsurprising outcome that gives indexers the upper hand in the ongoing debate between active and passive investing, according to a report Standard & Poor's releases twice a year.

The results look even more devastating in the fixed-income space. The Standard & Poor's Indices Versus Active Funds Scorecard for the 12 months ended Dec. 31 show that 96.7 percent of active managers on the long end of the Treasurys yield curve were beaten by their benchmarks. That dismal performance was less pronounced on shorter-dated debt funds, but the underlying tale is the same.

The numbers reaffirm the historical trend. For most of the last decade, active management has underperformed in most stock and bond asset classes, with only a handful of managers beating their benchmark. The last year active management fared better was in 2009, when markets were in upheaval following the market crash of 2008, an outcome that hadn't been seen since 2000, when 40.5 percent of managers failed to beat their indexes, versus 2009's 41.67 percent.

Overall last year, the number of domestic equity managers that underperformed their benchmarks was significantly larger than historical averages over three- and five-year figures, at 84.07 percent, with midcap managers faring the best of all equity categories. Roughly a third of midcap managers outperformed their indexes in 2011.

That outperformance was a bit less pronounced on an asset-weighted basis, which confines active vs. passive comparisons to funds of similar sizes, but still held true. In 2011, actively managed midcap equity funds, for instance, lost 3.73 percent, while the S&P MidCap 400 Index only gave up 1.73 percent in the same period.

Even more striking is the asset-weighted performance of large-cap funds, which ended the year with losses of 0.53 percent at a time when the S&P 500 Index gained 2.12 percent. Overall, 81 percent of large-cap active managers failed to beat their indexes.

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


1-Year %

3-Year %

5-Year %

S&P 500




All Large-Cap Funds








S&P MidCap 400




All MidCap Funds








S&P Small Cap 600




All Small-Cap Funds








S&P Composite 1500




All MultiCap Funds




Long-Dated Active Bond Managers Fare Worse

Active bond managers fared worse than their counterparts in equities in the past year, but that outcome is particularly evident on long-dated funds, where 96 percent of active managers in the U.S. government bond space failed to meet or beat their benchmarks.

Even through an asset-weighted screen, the actively managed numbers were dismal: Long-dated active funds only yielded 9.28 percent in 2011 compared with a respective Barclays long-dated government index's returns of nearly 30 percent last year.



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