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SPIVA Canada Mid-Year 2021

SPIVA India Mid-Year 2021

SPIVA South Africa Mid-Year 2021

SPIVA U.S. Mid-Year 2021

SPIVA Institutional Scorecard Year-End 2020

SPIVA Canada Mid-Year 2021

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Gaurav Sinha

Managing Director, Head of Americas Global Research & Design

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Berlinda Liu

Director, Global Research & Design

The Canadian market, like many of its counterparts around the world, soared upward during the past year despite the COVID-19 pandemic. The S&P/TSX Composite gained 33.9% for the 12-month period ending on June 30, 2021, and the smaller-cap names of the S&P/TSX Completion did slightly better, with a 35.3% gain.

Unlike many previous reports, where the performance of active funds has been similar across categories, at mid-year 2021 there was a wide spread of outcomes. For example, 60% of Canadian Equity funds and 98% of Canadian Dividend & Income Equity funds fell short of their respective benchmarks over the past 12 months. However, just 15% of Canadian Small-/Mid-Cap Equity and 23% of Canadian Focused Equity funds underperformed over the same timeframe (see Report 1).

Even for the most recent outperformers, however, the longer-term picture remains unfavorable. Canadian Focused Equity funds were the worst-performing category over the past 10 years, with 96% of funds failing to clear their hurdle rate. Canadian Small-/Mid-Cap Equity funds— technically the best-performing category over the past 10 years—had 62% of funds trailing the benchmark.

Exhibit 1

The level of out- and underperformance also showed wide spreads over the past year. On an equal-weighted basis, Canadian Small-/Mid-Cap Equity funds beat the S&P/TSX Completion by 10.7%. Larger funds tended to do a little worse than smaller funds, as the asset-weighted difference between these active funds and the benchmark narrowed down to 9.0%. On the other hand, Canadian Dividend & Income Equity funds trailed the S&P/TSX Canadian Dividend Aristocrats® Index by 12.9%, with little difference by size (see Reports 3 and 4).

Larger Canadian Equity funds (benchmarked against the S&P/TSX Composite) did better than their smaller counterparts. On an equal-weighted basis, these funds lagged by 1.7%, but on an asset-weighted basis, they actually surpassed the benchmark by 3.8%. Unfortunately, looking back over the past 10 years, these funds trailed the index by roughly 1% per year, regardless of weighting (see Reports 3 and 4).

Funds looking outside of Canada posted solid absolute returns, though they lagged their domestic-oriented peers and broadly failed to add value through active management. U.S. Equity, International Equity, and Global Equity funds posted similar annual returns on an asset-weighted basis of 24.4%, 22.3%, and 22.8%, respectively. However, the majority of these active managers (67%, 58% and 69%, respectively) still trailed their corresponding benchmarks over the past year (see Reports 1 and 4).

The SPIVA Scorecards' accounting for survivorship bias continues to provide a valuable caution for asset allocators. While more than 90% of funds stayed alive over the past year, 54% of all funds in the eligible universe 10 years ago have since been liquidated or merged. Global Equity funds were the most likely to survive after 10 years, with 65% still in business. Canadian Focused Equity funds were the least likely to survive, as just 38% managed to do so (see Report 2).

Exhibit 2

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SPIVA India Mid-Year 2021

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Akash Jain

Associate Director, Global Research & Design

S&P Dow Jones Indices has been the de facto scorekeeper of the ongoing active versus passive debate since the first publication of the S&P Indices Versus Active Funds (SPIVA) U.S. Scorecard in 2002. Over the years, we have built on our experience publishing the report by expanding scorecard coverage into Australia, Canada, Europe, India, Japan, Latin America, and South Africa.

The SPIVA India Scorecard compares the performance of actively managed Indian mutual funds with their respective benchmark indices over 1-, 3-, 5-, and 10-year investment horizons. In this scorecard, we studied the performance of three categories of actively managed equity funds and two categories of actively managed bond funds over the 1-, 3-, 5-, and 10-year periods ending in June 2021.

Despite a strong run up in Indian equities in the first half of 2021, the majority of active funds in the large-cap and mid‑/small-cap fund categories lagged their respective benchmarks whereas active funds in the ELSS fund category fared better, in which only 36.59% of active funds underperformed the S&P BSE 200 (see Exhibit 1).

The mid-/small-cap fund category was the best performing among equity funds covered in this scorecard, with the S&P BSE 400 MidSmallCap Index returning 90.56% over the one-year period ending in June 2021. Investors in this category may have witnessed a wide spread in fund returns (the difference in the first and third quartile funds was 27.87%), posing investors with fund selection risks and challenges.

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SPIVA South Africa Mid-Year 2021

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Andrew Innes

Head of EMEA, Global Research & Design

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Andrew Cairns

Director, Global Research & Design

S&P Dow Jones Indices has been the de facto scorekeeper of the ongoing active versus passive debate since the first publication of the S&P Indices Versus Active (SPIVA) U.S. Scorecard in 2002.  The SPIVA South Africa Scorecard measures the performance of actively managed South African equity and fixed income funds denominated in South African rands (ZAR) against their respective benchmark indices over six-month and one-, three-, and five-year investment horizons.

MID-YEAR 2021 HIGHLIGHTS

South African Equity

Through the first six months of the year, 60% of South African Equity funds underperformed the S&P South Africa 50.  The same funds fared slightly better in comparison with the S&P South Africa Domestic Shareholder Weighted (DSW) Capped Index; 49% of funds underperformed that benchmark.  A similar, yet less favorable, finding for active funds was evident over longer time horizons, during which the majority underperformed both benchmarks.  Over the five-year period, 93% and 54% underperformed the S&P South Africa 50 and S&P South Africa DSW Capped Index, respectively.

A common argument against comparing active fund performance with that of a passive benchmark is that performance alone cannot tell the whole story and that risk should also be taken into account.  However, Report 1b tells a similar tale; for South African Equity funds, the level of underperformance on a risk-adjusted basis over the five-year period is no better than when comparing returns alone.  Over this period, 93% and 53% of South African Equity funds underperformed the S&P South Africa 50 and S&P South Africa DSW Capped Index, respectively, on a risk-adjusted basis.

The S&P South Africa 50 recorded remarkable returns for the six-month and one-year periods, gaining 13.7% and 27.8%, respectively.  On an asset-weighted basis, South African Equity funds fared well in comparison to this benchmark, outperforming by 0.79% and 1.17% over the six-month and one-year periods, respectively.  However, this recent outperformance was not representative of the longer-term three- and five-year periods, when South African Equity funds underperformed by an annualized figure of 3.11% and 4.33%, respectively.

Global Equity

During the first six months of the year, 64% of Global Equity funds were outperformed by the S&P Global 1200, this figure rose to 89% over the three- and five-year periods.  On a risk-adjusted basis, this impressive outperformance continued, with 91% of funds failing to beat the S&P Global 1200 for the three- and five-year periods.

On an asset-weighted basis, there was little to separate Global Equity fund returns from their benchmark for the one-year period; fund returns were higher by 0.22%.  The benchmark outperformed by an annualized 2.92% and 1.72% over the three- and five-year periods, respectively.  Further highlighting the S&P Global 1200’s dominance over the long term, even the 75th percentile of Global Equity funds failed to outperform the benchmark for the three- and five-year periods.

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SPIVA U.S. Mid-Year 2021

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Gaurav Sinha

Managing Director, Head of Americas Global Research & Design

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Berlinda Liu

Director, Global Research & Design

SUMMARY

Following an initial steep drop and recovery at the onset of the COVID-19 pandemic, equity markets around the world continued their rebound in 2021 as the global economy began to re-open.  The S&P 500® had recovered all of its COVID-19-related losses by August 2020, and it posted a 40.8% gain over the 12 months ending on June 30, 2021.  Of the 31 distinct benchmarks tracked by this report, 27 finished with a positive return over the year; the exceptions were among longer-term fixed income indices.

The positive market performance broadly translated into good absolute returns for active fund managers.  But relative returns continued to disappoint; in 15 out of 18 categories of domestic equity funds, the majority of actively managed funds underperformed their benchmarks.  The performance was particularly underwhelming in the small-cap space, as 78% of all small-cap funds lagged the S&P SmallCap 600®.

Percent of Domestic Equity Funds Underperforming Benchmarks in Trailing One-Year Period

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SPIVA Institutional Scorecard Year-End 2020

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Gaurav Sinha

Managing Director, Head of Americas Global Research & Design

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Berlinda Liu

Director, Global Research & Design

SUMMARY

In this report, we add institutional accounts to the mutual funds analyzed in the S&P Indices Versus Active (SPIVA®) U.S. Scorecard. We aim to provide the institutional community with the ability to judge managers' true skills without the possible distortions that fees may create on performance comparisons. We also examine the impact of fees on both account types. By comparing retail mutual funds and institutional accounts on a gross-of-fees basis against their respective benchmarks, we eliminate the possibility that fees are the sole contributor to a given manager's underperformance.

Overall, underperformance among institutional equity accounts was not meaningfully different from that reported for mutual funds.  For example, 78% of large-cap institutional accounts and 77% of large-cap mutual fund managers underperformed the S&P 500® on a gross-of-fees basis over the past 10 years.  Net-of-fees, of course, results were even worse, with an additional 5% of large-cap institutional and mutual fund managers underperforming the benchmark (see Exhibit 1).

Exhibit 1

Institutional accounts had a better chance than their mutual fund counterparts of outperforming their benchmarks (gross-of-fees) in 12 of the 17 domestic equity fund categories tracked. Nonetheless, the majority of institutional accounts across all equity fund categories underperformed over the 10-year period, ranging from a high of 85% of multi-cap core funds to a low of 50% of mid-cap growth funds (see Report 1).

The volatility in financial markets in 2020 provided ample opportunity for fund managers to show their stock-picking skills. Growth managers in particular were well positioned to benefit from the accelerated lifestyle changes as a result of the pandemic. A stellar 86% of small-cap growth and mid-cap growth institutional funds were able to beat the S&P MidCap 400® Growth and S&P SmallCap 600® Growth, respectively, in 2021. A less impressive 53% of large-cap growth funds beat the S&P 500 Growth. However, the longer-term statistics remained sobering, as just 23%, 50%, and 43% of large-, mid-, and small-cap growth funds, respectively, were able to stay ahead of their benchmarks for the 10-year horizon. This might be explained by the remarkable outperformance of the S&P 500 Growth (33.5%) over the S&P MidCap 400 Growth (22.8%) and the S&P SmallCap 600 Growth (19.6%) in 2020. Tilting toward larger-cap stocks no longer helped these active funds when the performance gap narrowed over longer time periods (see Report 1).

The story was broadly similar for value fund managers. Although value indices continued to trail growth indices as they did for much of the previous decade, value managers joined the 2020 outperformance party: 71%, 54%, and 66% of large-cap, mid-cap, and small-cap value funds beat their benchmarks, respectively. The 10-year tale was somewhat less celebratory, as just 38%, 39%, and 29% managed the feat over the longer period (see Report 1).

International funds were a notable exception to 2020's equity exuberance. In all four categories across all four time periods analyzed, the majority of funds fell short of their benchmarks (see Report 6).

Fixed income results were mixed, as a majority of funds in 8 of the 17 categories underperformed their benchmarks over the 1- and 10-year horizons (see Report 11).

As a fourth round of quantitative easing took place in the U.S., lower interest rates and a rush to the suburbs soon followed, buoying home prices (and prompting refinancings). MBS funds took full advantage, as 75% beat the Bloomberg Barclays U.S. MBS Index in 2020, the best of any fixed income category. A respectable 62% also did so over the previous 10 years (see Report 11).

Government funds did not come along for the fixed income ride. While the Bloomberg Barclays U.S. Government Index posted a healthy 7.94% return in 2020, actively managed government funds only squeezed out a 6.69% return on an equal-weighted basis and 5.71% on an asset-weighted basis. This led to a worst-in-class 24% of active managers that managed to surpass their benchmarks in 2020, while a woeful 11% did so over the previous 10 years (see Reports 11, 13, and 14).

Among mutual funds, active international equity managers showed greater differences between the gross- and net-of-fees relative performance figures than did their domestic fund peers. No such notable difference between categories was observed among institutional accounts (see Exhibits 2 and 3).

For fixed income funds, relative performance chances suffered the greatest impact from fees in the emerging markets debt space. While 37% of institutional emerging markets hard currency funds failed to clear the benchmark over the past 10 years, gross-of-fees, 100% failed to do so net-of-fees (see Exhibit 5).

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