Swedroe: No Shockers From Midyear SPIVA

September 16, 2015

The midyear S&P Indices Versus Active (SPIVA) domestic scorecard provides another example of why (at least when it comes to the overall results of active management relative to appropriate benchmarks) the past is, in fact, prologue.

Let’s review some of the highlights from the June 2015 scorecard. The table below shows the percentage of active managers that were outperformed by their benchmarks over the one-year and 10-year periods ending June 30:


Asset Class One-Year Period Ending June 30, 2015 (%) 10-Year Period Ending June 30, 2015 (%)
Large Growth 44.3 89.7
Large Core 71.2 81.7
Large Value 69.8 61.1
Mid Growth 47.5 88.8
Mid Core 57.7 91.5
Mid Value 45.5 84.0
Small Growth 94.8 85.9
Small Core 70.3 83.2
Small Value 76.2 82.2
Real Estate 60.1 78.4
Developed International 34.4 82.5
Developed Small 50.7 56.5
Emerging Markets 73.3 92.2
Long-Term Government 98.8 93.3
Intermediate-Term Government 88.9 75.6
Short-Term Government 86.7 75.6
Long-Term Investment Grade 82.9 92.9
Intermediate-Term Investment Grade 79.6 52.6
Short-Term Investment Grade 83.5 57.4
High Yield 51.1 92.9
Mortgage-Backed Securities 58.7 77.6
Emerging Markets Debt 90.4 81.3

SPIVA Results

For the one-year period, of the 13 equity asset classes, a majority of active funds managed to outperform in only four. For the 10-year period, there was no asset class for which that was the case. In general, the percentage of active managers failing to outperform increased as the time horizon increased.

Also, note that in the supposedly inefficient asset classes of U.S. small, small growth and small value stocks, a large majority of active funds underperformed in both the one-year and 10-year periods. For the 10-year period, performance in what’s generally considered the most inefficient asset class—emerging markets—was even worse. Finally, while a majority of international large funds outperformed in the one-year period, a large majority of them failed to do so in the 10-year period.

Looking at the debt markets, we see even worse results. There was no case in which a majority of active funds outperformed. This was especially true in the case of emerging market debt; again, a supposedly inefficient asset class. More than 90 percent of the active funds in this asset class underperformed their benchmark for the one-year period, and more than 80 percent failed to outperform over the 10-year period.

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