Since the first publication of the S&P Indices Versus Active Funds (SPIVA) U.S. Scorecard in 2002, S&P Dow Jones Indices has been the de facto scorekeeper of the ongoing active versus passive debate . Over the years, we have built on more than a decade of experience publishing the report by expanding coverage into Canada, India, Japan, Australia, Latin America, and South Africa. While the report will not end the debate on active versus passive investing, we hope to make a meaningful contribution by examining market segments in which one strategy might work better than the other.
The SPIVA Europe Scorecard measures the performance of actively managed European equity funds denominated in euro (EUR), British pound sterling (GBP), and other European local currencies against the performance of their respective S&P DJI benchmark indices over 1-, 3-, 5-, and 10-year investment horizons. In 2015, the range of fund categories covered in the SPIVA Europe Scorecard was expanded to include domestic equity funds from Italy, the Netherlands, Poland, Spain, Switzerland, and the Nordic region, with specific data for Denmark and Sweden.
Equity Funds Denominated in Euros (EUR)
Global equity markets, as measured by the S&P Global 1200, rose 11.51% over the one-year period in euro terms. This improved performance was due to a more benign global economic outlook and an easing of uncertainty that followed the Brexit referendum and the U.S. presidential election. While the prevailing market conditions turned more positive, our report indicates that euro-denominated active funds invested in pan-European equities underperformed across all time horizons analyzed. That said, there were a few exceptions over the short term. Some active fund categories invested in single countries (e.g., Denmark and Switzerland) managed to beat their corresponding benchmarks over the one-year period, even though they underperformed over the longer run.
In regard to emerging market equities, performance was strong, as macroeconomic data in many major economies appeared to stabilize. Even so, there is often a widely held belief that active portfolio management can be most effective in less efficient markets, such as emerging market equities, because these markets can provide managers the opportunity to exploit perceived mispricing. However, this view was not substantiated by our research, as over 90% of active funds underperformed their benchmarks over all time horizons.
In the U.S., equity markets delivered strong returns over the one-year period, but more than 79% of U.S. active funds underperformed the S&P 500®. This poor performance persisted over the longer term, as over 97% of active funds trailed the benchmark over the 10-year period.
The relationship between the size of funds (i.e., the amount of assets under management) and their success appears to be uncertain across different categories of funds. Results from Reports 3 and 4 highlight that equal-weighted returns were higher than asset-weighted returns in some, but not all, categories. Over the 10-year period, more than 50% of euro-denominated active funds invested in European equities were either liquidated or merged.
Funds Denominated in Pound Sterling (GBP)
With respect to GBP-denominated categories, the majority of actively managed funds invested in UK equities and UK large- and mid-cap equities lagged their benchmarks over the one-year horizon. This stands in contrast with UK small-cap funds, which outperformed their corresponding benchmark over the same period. In spite of this, active funds in all UK equity categories underperformed their benchmarks over the long-term.
As for other fund categories covered in this report, they generally underperformed their benchmarks across all time periods.
Funds Denominated in Other European Local Currencies
The performance of funds in this category was generally mixed over the short run, but all funds trailed their benchmarks over the 10-year horizon.