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. 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.
MID-YEAR 2018 HIGHLIGHTS
- Of the active pan-European equity funds (euro-denominated), 59% failed to beat the S&P Europe 350® from June 2017 to June 2018.
- The mean one-year performance for the fund category was 28 bps higher than the benchmark. This may indicate the minority of funds outperformed sufficiently to prop up the group’s average.
- The proportion of funds in the category failing to beat the same benchmark rose to 87% over the 10-year period.
- Volatility reappeared in Q1 2018, but ultimately European equity markets remained resilient.
- The S&P Europe 350 was up 3.5% (in euros) year-over-year in June 2018.
- Recent eurozone GDP data pointed to stable growth in the first half of 2018, albeit lower than 2017.
- The ECB’s announcement to keep historically low interest rates through the summer of 2019 was received favorably by the markets, despite it also announcing that it will end its quantitative easing program by the end of 2019.
- The track record for euro-denominated active funds investing in either U.S. or global equities remained bleak.
- Over the 10-year period ending in June 2018, only 11 out of 490 eligible active funds investing in U.S. equities (denominated in euros) survived and outperformed the S&P 500®.
- The equivalent figure for the euro-denominated Global Equity fund category was 15 out of 1,396 funds that survived and outperformed the S&P Global 1200.
- The S&P 500 outperformed many European benchmark indices; up 11.7 % in euro terms over the one-year period ending in June 2018.
- U.S. tax cuts and fiscal stimulus supported a wide earnings gap for U.S. corporates over Europe and elsewhere.
- Lifted by large exposure to the U.S., the S&P Global 1200 posted a return of 9.1% in euros.
- The desynchronization of global growth and central banks’ policies hindered emerging markets. Active funds investing in these regions from within Europe generally did not find stock picking to be advantageous.
- Rising geopolitical risk, oil prices, trade tariffs, and a general strengthening of the U.S. dollar in the first half of 2018 weighed least favorably on emerging markets’ growth expectations.
- Emerging markets experienced significant sell-offs in H1 2018. However, gains from the second half of 2017 resulted in the broad emerging equities benchmark, the S&P/IFCI, returning 6.3% year-over-year in euro terms as of mid-year 2018.
- The asset-weighted performance of active emerging market equity funds (denominated in EUR) was 3.0% for the same period.
- One in five of these funds beat the returns of the benchmark over the one-year period ending in June 2018. This success rate falls to 1 in 100 over the 10-year period.
- A handful of single-country fund categories across Europe outperformed their respective benchmarks in the one-year period ending June 2018.
- On an asset-weighted basis, the average performance of active equity funds in Spain, Switzerland, Sweden, and small-cap companies in the UK was better than their respective benchmarks over the one-year period.
- On the same basis, France, Germany, Italy, Netherlands, Denmark, and Poland active equity funds underperformed their respective benchmarks.
