Equity markets in Latin America saw gains across the board in 2016, with Brazil being one of the leaders, as the S&P Brazil BMI (BRL) returned 37.90%. The Chilean market saw the largest yearly return since 2010, with a return of 13.53% for the S&P Chile BMI (CLP), while the S&P Mexico BMI (MXN) returned 6.99%.
As shown in Exhibit 1, the majority of active fund managers in Latin American markets were unable to outperform their respective benchmarks for all categories measured—one-, three-, and five-year periods.
Exhibit 1: Percentage of Funds Outperformed by the Benchmark
|Fund Category||Comparison Index||One-Year (%)||Three-Year (%)||Five-Year (%)|
|Brazil Equity Funds||S&P Brazil BMI||81.95||70.02||72.29|
|Brazil Large-Cap Funds||SS&P Brazil LargeCap||97.80||72.45||85.88|
|Brazil Mid-/Small-Cap Funds||S&P Brazil MidSmallCap||69.88||89.89||84.06|
|Brazil Corporate Bond Funds||Anbima Debentures Index (IDA)||91.87||95.29||98.39|
|Brazil Government Bond Funds||Anbima Market Index (IMA)||76.57||82.25||81.94|
|Chile Equity Funds||S&P Chile BMI||85.71||86.05||88.89|
|Mexico Equity Funds||S&P Mexico BMI||75.51||85.11||69.77|
Source: S&P Dow Jones Indices LLC, Morningstar. Data for periods ending Dec. 31, 2016. Outperformance is based on equal-weighted fund counts. Index performance based on total return in local country currency. Table is provided for illustrative purposes. Past performance is no guarantee of future results.
Exhibit 2 shows the rolling five-year underperformance numbers reported in the SPIVA Latin America Scorecard since it was introduced in 2015. For all categories, the majority of managers underperformed their benchmark for a five-year time horizon, regardless of the report end date. “Consistent underperformance” is a suitable characterization.