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SPIVA^® Europe Year-End 2018

SPIVA^® India Year-End 2018

SPIVA^® Japan Year-End 2018

SPIVA^® Latin America Scorecard Year-End 2018

SPIVA^® U.S. Year-End 2018

SPIVA - Apr 16, 2019

SPIVA^® Europe Year-End 2018

Andrew Innes

Head of Global Research & Design

S&P Dow Jones Indices

Andrew Cairns

Senior Director, Global Research & Design

S&P Dow Jones Indices

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.

YEAR-END 2018 HIGHLIGHTS

A high proportion of active funds in Europe underperformed their benchmarks in 2018; this coincided with substantial drawdowns in global and European equity markets toward the end of the year.

Of the active pan-European equity funds (euro-denominated), 86% failed to beat the S&P Europe 350^® over the year.
Markets became increasingly concerned throughout the year— global trade tensions, weakening economic growth in China, and eurozone and Brexit uncertainty were all contributing factors. The S&P Europe 350 was down 9.90% in euros at the end of the year.
Over the same period, active Pan-European equity funds were down 13.46% on an asset-weighted basis.

The majority of active fund managers underperformed in all 23 fund categories studied over 2018.

From the same 23 fund categories, only Spanish equity funds were able to narrowly outperform their benchmark on average (on an asset-weighted basis) over the year.

Over the 10-year time horizon, the majority of active equity funds analyzed were also unable to outperform their respective benchmarks. Over this longer timeframe, the percentage of funds that underperformed was between 65% and 98%, depending on the fund category.
Active funds domiciled within Europe and categorized as either global, U.S., or emerging market equities had notably low success rates with respect to their benchmarks over the 10-year period. Those denominated in euros with fund returns at the start of the 10-year period performed as follows.

Of the 1,376 Global Equity funds, 21 survived and outperformed.
Of the 239 Emerging Markets Equity funds, 5 survived and outperformed.
Of the 473 U.S. Equity funds, 11 survived and outperformed.

Initially robust U.S. market strength gave way to fears of an earnings slowdown, precipitated by disappointing financial results from high-profile Information Technology stocks in Q4 2018. Despite heavy declines in the S&P 500^®, U.S. dollar strength over the year offset some of those losses for investors based in Europe.

When expressed in euro and pound sterling, the S&P 500 was the only benchmark from this scorecard that recorded positive returns in 2018, up 0.44% and 1.56%, respectively.
On the same basis, average asset-weighted returns for active U.S. equity funds in 2018 were -3.30% and -1.33%, respectively.

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SPIVA - Apr 02, 2019

SPIVA^® India Year-End 2018

Akash Jain

Director, Global Research & Design

S&P Dow Jones Indices

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 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 December 2018.
In 2018, Indian Equity Large-Cap and Indian Equity-Linked Saving Schemes (ELSS) fund managers struggled to beat their respective benchmark, with more than 90% active funds underperforming their respective benchmarks in both categories. The S&P BSE 100, the benchmark for Indian Equity Large-Cap funds, returned 2.62% over the one-year period, whereas the S&P BSE 400 MidSmallCap Index, the benchmark for Indian Equity Mid-/Small-Cap funds, ended in the red, down 17.16% during the same period.
Indian Equity Large-Cap Funds: Over the one-year period, the S&P BSE 100 ended in the black, returning 2.62%, with 91.94% of funds underperforming the benchmark. In fact, across all the periods studied, the majority of actively managed large-cap equity funds in India underperformed the S&P BSE 100. Large-cap funds witnessed a low style consistency of 41.94% over the one-year period and a low survivorship rate of 66.67% over the 10-year period. The assetweighted fund return was 72 bps higher than the equal-weighted fund return over the 10-year period, and the return spread between the first and the third quartile break points of the fund performance was 3.39% for the same period.

Indian ELSS: Over the one-year period ending December 2018, the S&P BSE 200 remained flat, at 0.82%. Over the one- and three-year periods ending in December 2018, 95.45% and 88.10% of funds underperformed the benchmark. Over the 10-year horizon, the return spread between assetweighted and equal-weighted returns was only 7 bps, but the return spread between the first and the third quartile break points of the fund performance was 3.62%.
Indian Mid-/Small-Cap Equity Funds: The benchmark for Indian Mid-/Small-Cap Equity Funds, the S&P BSE 400 MidSmallCap Index, was down 17.16% during the one-year period ending December 2018. Though this equity segment ended deeply in red, only 25.58% of the active funds underperformed the benchmark over the one-year period. Over the 10-year period, the survivorship rate and style consistency were low, at 67.11% and 26.32%, respectively. For the same period, the asset-weighted fund return was 27 bps higher than the equal-weighted fund return, and the return spread between the first and the third quartile break points of the fund performance was 5.28%.
Indian Government Bond Funds: The S&P BSE Indian Government Bond Index returned 7.93% over the one-year period ending December 2018. Across all periods, a majority of funds underperformed the benchmark, with 81.58%, 71.43%, 88.00%, and 96.43% of actively managed funds in this peer group underperforming the benchmark over the 1-, 3-, 5-, and 10-year periods, respectively. Over the 10-year period ending in December 2018, survivorship rate and style consistency were at 37.50% and 33.93%, respectively. For the same period, the asset-weighted fund return was 14 bps higher than the equal-weighted fund return, and the return spread between the first and the third quartile break points of the fund performance was 90 bps.
Indian Composite Bond Funds: In the 12-month period ending in December 2018, the S&P BSE India Bond Index closed in the black with a gain of 7.8%. Over the 1-, 3-, 5-, and 10-year periods ending in December 2018, 94.44%, 90.97%, 96.64%, and 83.33% of the actively managed funds in this category lagged the benchmark, respectively. Over the 10-year period, survivorship rate and style consistency were at 75.00% and 61.25%, respectively. For the same period, the assetweighted fund return was 40 bps higher than the equal-weighted fund return, and the return spread between the first and the third quartile break points of the fund performance was 1.49%.
Average Fund Returns: In the one-year period ending in December 2018, the equal- and assetweighted returns of Indian Equity Large-Cap funds, Indian ELSS funds, and funds from both the bond categories were sharply lower than their respective benchmarks. In contrast, only the Indian Equity Mid-/Small-Cap category delivered higher equal- and asset-weighted average returns than its respective benchmark over the same period. Over the 10-year period, the largest outperformance relative to its benchmark was witnessed in the Indian Equity Mid-/Small-Cap fund category, as its asset-weighted return was 92 bps higher than its benchmark.

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SPIVA - Mar 27, 2019

SPIVA^® Japan Year-End 2018

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 experience publishing the report by expanding scorecard coverage into Australia, Canada, Europe, India, South Africa, Latin America, and Japan. While this report will not end the debate on active versus passive investing in Japan, we hope to make a meaningful contribution by examining market segments in which one strategy works better than the other.

The SPIVA Japan Scorecard reports on the performance of actively managed Japanese mutual funds against their respective benchmark indices over 1-, 3-, 5-, and 10-year investment horizons. In this scorecard, we evaluated returns of more than 815 Japanese large- and mid/small-cap equity funds, along with more than 678 international equity funds investing in global, international, and emerging markets, as well as U.S. equities.

Domestic Equity Funds: In 2018, the S&P/TOPIX 150 and the S&P Japan MidSmallCap suffered losses of 15.9% and 19.6%, respectively. Over the same period, 83.7% and 58.2% of large- and mid/small-cap equity funds underperformed their respective benchmarks, with average returns of -18.7% and -20.5%, respectively. The performance of domestic equity funds relative to their benchmark in 2018 was much worse than the observations in 2017, when the majority of funds outperformed the benchmark.

Over the 10-year horizon, 63.2% and 56.2% of large- and mid/small- cap funds underperformed their benchmarks, respectively. While the equal- and asset-weighted 10-year annualized returns for large-cap equity funds only differed by 0.14%, the equal-weighted 10-year annualized return of the mid/small-cap equity funds exceeded the asset-weighted return by 2.94%, indicating smaller funds in the mid/small-cap equity fund category delivered much better returns than the larger funds.

Foreign Equity Funds: In 2018, apart from the emerging market equity fund category, the majority of foreign equity funds underperformed their respective benchmarks and posted lower equal- and asset-weighted returns than their respective benchmarks. The S&P 500^® recorded a loss of 4.7%, while U.S. equity funds had equal- and asset-weighted returns of -11.4% and -9.5%, respectively. In contrast, the S&P Emerging BMI had a return of -19.5%, while emerging market equity funds posted a lower drawdown of 18.0% and 17.6% on an equal- and asset-weighted basis, respectively.

Over the 10-year period, the majority of foreign equity funds underperformed their respective benchmarks. More than 90% of global, international, and emerging equity funds were outperformed by their respective benchmarks on an absolute and risk-adjusted basis. U.S. and global equity funds underperformed their respective benchmarks the most over the 10-year period (more than 300 bps). Foreign equity funds had 5- and 10-year survivorship rates of 72.9% and 57.9%, respectively, which is slightly lower than the rates for the domestic equity funds, where the 5- and 10-year survivorship rates were 80.1% and 72.9%, respectively.

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SPIVA - Mar 27, 2019

SPIVA^® Latin America Scorecard Year-End 2018

Phillip Brzenk

Managing Director, Global Head of Multi-Asset Indices

S&P Dow Jones Indices

María Sánchez

Director, Sustainability Index Product Management, U.S. Equity Indices

S&P Dow Jones Indices

SUMMARY

The S&P Indices Versus Active (SPIVA) Latin America Scorecard reports on the performance of actively managed mutual funds in Brazil, Chile, and Mexico against their respective category benchmarks over different time horizons. Starting with this report, we expand the analysis to include the 10-year investment horizon in addition to the previously reported 1-, 3-, and 5-year investment horizons. The expansion to include a 10-year horizon enables us to look at how funds perform over full market cycles, capturing both bear and bull markets.

Brazil

The Brazilian equity market heated up in the second half of 2018, rising 21.4% from July to December (as measured by the S&P Brazil BMI). The market returned 15.8% for the year, marking the third straight year of double-digit gains. Mid- and small-cap companies (as measured by the S&P Brazil MidSmallCap) led the way, returning 17.5%, while largecap companies (as measured by the S&P Brazil LargeCap) returned 15.1%.
With the continued stabilization of inflation in 2018, returns for fixed income securities were lower than previous years. Corporate bonds (as measured by the Anbima Debentures Index) were up 9.1% and government bonds (as measured by the Anbima Market Index) gained 10.1%.
2018 saw the majority of active fund managers underperforming the category benchmark in four of the five categories. As we saw in the mid-year 2018 report, slightly more large-cap active managers (51.1%) were able to beat the benchmark than underperformed it. For this category, the one-year asset-weighted average fund return (17.1%) was higher than the equalweighted average fund return (15.1%). In general, this means that managers with more assets performed better than funds with smaller assets.
Managers had little success when their performance was measured over the long term, as the majority of funds underperformed their respective benchmarks for the 3-, 5-, and 10-year horizons for all 5 categories.

Chile

The Chilean equity market fell by nearly 8% in 2018 as measured by the S&P Chile BMI, a sharp reversal from the strong gains (33%) in 2017.
In the downturn, the majority (60%) of active fund managers underperformed the S&P Chile BMI. This is an improvement from the numbers seen in 2017, when over 75% of managers underperformed that year; however, with advocates of active management saying that managers have the ability to weather the storm of down markets better than passive benchmarks, the numbers paint a different picture for the majority.
The majority of managers also underperformed over the 3-, 5-, and 10-year investment horizons. The 10-year horizon ending in 2018 saw cycles of bull and bear markets, with 4 calendar years of negative equity returns and 6 years of positive returns. Over the same period, over 97% of managers underperformed the benchmark by an equal-weighted average of nearly 2% per year.

Mexico

Uncertainty revolving around the new presidential regime in late 2018 affected Mexico’s equity market returns, as the S&P/BMV IRT fell 11.6% in the second half of 2018, which resulted in a fullyear return of -13.6%.
In 2018, 58.2% of active equity fund managers beat the benchmark, as the equal-weighted average fund return was 1.2% higher than the benchmark return.
Managers did not have the same success for the longer-term horizons. Over the 10-year period, 86% of managers underperformed the benchmark. Over the same period, the equal-weighted average fund return was 78 bps lower (annualized) than the benchmark, while the asset-weighted average was 25 bps lower (annualized).

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SPIVA - Mar 11, 2019

SPIVA^® U.S. Year-End 2018

Hamish Preston

Head of U.S. Equities

S&P Dow Jones Indices

SUMMARY

2018 was a rollercoaster ride for financial markets: after trade tensions weighed on investors’ sentiment in Q1, strong corporate earnings and a rosy U.S. economic outlook initially drove a recovery, before uncertainty over global economic growth and future Fed policy wiped off YTD gains for many equity benchmarks in Q4.

The S&P 500^®; (-4.38%) finished 2018 with its first calendar-year loss in a decade, while the S&P MidCap 400^® (-11.08%) and the S&P SmallCap 600^® (-8.48%) also fell.

Amid the market volatility, 2018 was the fourth-worst year for U.S. equity managers since 2001; 68.83% of domestic equity funds lagged the S&P Composite 1500^® during the one-year period ending Dec. 31, 2018.

For the ninth consecutive year, the majority (64.49%) of large-cap funds underperformed the S&P 500. The figures highlight that heightened market volatility does not necessarily result in better relative performance for active investing.

Similarly, small-cap equity managers found it more challenging to navigate 2018’s market environment compared with 2017’s rangebound market movements; 68.45% of all small-cap funds lagged the S&P SmallCap 600 over the one-year horizon. Underperformance was particularly noticeable in the small-cap value (83.33%) and small-cap core (87.55%) categories.

Growth style investing dominated through the third quarter of 2018, before succumbing to the market turbulence observed after September. However, most domestic large- and small-cap growth managers lagged their respective benchmarks in 2018. In fact, compared with results from 12 months prior, we saw 27.35 and 46.37 percentage point increases in the proportion of funds lagging the S&P 500 Growthand S&P SmallCap 600 Growth, respectively.

U.S. large-cap value offered a bright spot for active management in 2018; roughly 54% of the managers in the category beat the S&P 500 Value

For the second consecutive year, most domestic mid-cap funds outperformed the S&P MidCap 400. The impressive performance of mid-cap growth funds helped; 84.80% of managers beat the S&P MidCap 400 Growth, which in turn outperformed the S&P MidCap 400 in 2018.

Over the long-term investment horizon, such as 10 or 15 years, 80% or more of active managers across all categories underperformed their respective benchmarks.

It was a challenging year for global equities as all but 2 of the S&P Global BMI’s 48 country constituents declined (in USD terms). International and emerging market funds generally struggled to navigate the headwinds; 76.84% of international funds lagged the S&P 700, while the majority of emerging market managers failed to beat the S&P/IFCI Composite.

International small-cap funds had difficulty outperforming the benchmark in 2018; 65.52% of the category’s funds lagged the 18.41% plunge of the S&P Developed Ex-U.S. SmallCap.

Uncertainty over future Federal Reserve policy offered headwinds for fixed income managers at the shorter end of the curve. The vast majority of government short funds, and all of their intermediate counterparts, lagged in 2018. Similar results were recorded by the investment-grade short and intermediate categories.

In contrast, the long-end of the curve fared much better; a thumping 83.02% of government long funds and 90.91% of investment-grade long funds outperformed over the one-year horizon. But in signs that recent out-performance is no guarantee of future results, over 90% of both categories lagged over the three-year period.

Elsewhere, the majority of high-yield managers, municipal bond funds, leveraged loan funds, and MBS funds underperformed their benchmarks in 2018.

While there were some differences in relative performance figures compared with prior reports, the longer-term 15-year figures show that most active fixed income managers underperformed their benchmarks.

The disappearance of funds remains meaningful; 57% of domestic equity funds, 49% of international equity funds, and 52% of all fixed income funds were merged or liquidated over the 15-year horizon. This highlights the need to correct for survivorship bias.

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