SUMMARY
- S&P Dow Jones Indices has been the de facto scorekeeper of the ongoing active versus passive debate since the first publication of the SPIVA U.S. Scorecard in 2002. Over the years, we have built on our 16 years of experience publishing the report by expanding scorecard coverage into Australia, Canada, Europe, India, Japan, Latin America, and South Africa.
- The SPIVA Australia Scorecard reports on the performance of actively managed Australian mutual funds against their respective benchmark indices over 1-, 3-, 5-, 10-, and 15-year investment horizons. 1 In this scorecard, we evaluated returns of more than 849 Australian equity funds (large, mid, and small cap, as well as A-REIT), 425 international equity funds, and 116 Australian bond funds.
- In the one-year period ending June 30, 2018, the majority of Australian funds in most categories underperformed their respective benchmarks, apart from the Australian mid- and small-cap category. However, the yearly active versus index figures varied across market cycles without consistent trends.
- We have consistently observed that the majority of Australian active funds in most categories fail to beat their comparable benchmark indices over the long term. Over the 10-year period ending June 30, 2018, almost 90% of international equity funds and more than 70% of Australian equity general, Australian bond, and A-REIT funds underperformed their respective benchmarks on an absolute basis. In contrast, more than half of Australian small-cap funds beat their benchmarks.
- Observations based on risk-adjusted returns were similar for most categories, with the result for the Australian bond and A-REIT funds being more favorable across various measured periods.
- Australian Equity General Funds: Over the one-year period ending June 30, 2018, the S&P/ASX 200 gained 13.0%, while Australian large-cap equity funds recorded a return of 12.3%, with 57.6% of funds underperforming the S&P/ASX 200. Over the 5-, 10-, and 15-year periods, 68.7%, 71.4%, and 80.2% of funds in this category failed to beat the S&P/ASX 200, respectively.
- Australian Equity Mid- and Small-Cap Funds: As of June 30, 2018, the S&P/ASX Mid-Small Index recorded a 12-month return of 18.8%, while Australian mid- and small-cap funds gained a higher average return of 20.8%, with 44.9% of funds underperforming the benchmark. Over the three- and five-year periods, more than 70% of funds in this category underperformed the benchmark, which was higher than the observations over the longer measured periods.
- International Equity General Funds: As of June 30, 2018, this fund category had the highest portion of funds underperforming the benchmark, the S&P Developed Ex-Australia LargeMidCap, across the majority of the measured periods. Over the one-year period, the international equity general funds posted a smaller average return (14.1%) than the benchmark’s return (15.8%), with more than 70% of funds underperforming the benchmark.
- Australian Bond Funds: The Australian bond funds gained 2.4% over the 12-month period ending June 30, 2018, with 69.1% of them lagging the S&P/ASX Australian Fixed Interest 0+ Index. The majority of funds in this category delivered lower-than-benchmark returns across different measured periods, but their risk-adjusted performance appeared more favorable, with 52.7%, 66.0%, and 69.0% of funds lagging the benchmark over the 1-, 5-, and 10-year periods, respectively, on a riskadjusted basis.
- Australian Equity A-REIT Funds: As of June 30, 2018, the vast majority of Australian A-REIT funds (91.3%) underperformed the S&P/ASX 200 A-REIT over the one-year period. The S&P/ASX 200 A-REIT gained 13.0%, while funds in this category delivered a lower average return of 11.2% over the same period. Observations based on risk-adjusted returns were less unfavorable for the A-REIT funds, with 78.3% of funds underperforming the benchmark.
- Fund Survivorship: In the one-year period ending June 30, 2018, 3.4% of Australian funds from all measured categories were merged or liquidated, with Australian mid- and small-cap funds disappearing at the fastest rate and Australian bond and A-REIT funds recording a 100% survival rate. Over the longer periods, less than 60% and 50% of funds across all categories survived for the 10- and 15-year periods, respectively, with Australian bond and international equity funds having the lowest survival rates.
- Equal-Weighted Average Fund Returns: Apart from the Australian mid- and small-cap funds, equal-weighted average returns of all fund categories were below their respective benchmark returns for the one-year period ending June 30, 2018. Observations over the 10-year periods were similar, as Australian mid- and small-cap equity funds recorded average excess returns of 4.4% per year, while international equity funds lagged the benchmark by 1.8% per year.
- Asset-Weighted Average Fund Returns: Aside from Australian mid- and small-cap funds, the asset-weighted average returns were broadly higher than their respective equal-weighted average returns for all fund categories, which indicates that larger funds tended to perform better than smaller funds in these categories.
