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 2019 HIGHLIGHTS
- Over the one-year period, 71% of active European equity funds denominated in euros underperformed the S&P Europe 350®.
- On an asset-weighted basis, the benchmark outperformed funds in this category by 1.5%.
- 2019 was a buoyant year for European equities following the sharp downturn that occurred at the end of 2018. Markets proved more resilient in the face of continued trade disputes between the U.S. and China, while a stimulus package from the European Central Bank in September 2019 gave equities a further boost.
- Over the one-year period, 18 of the 23 equity benchmarks measured in the SPIVA Europe Scorecard posted returns of over 20%.
- The asset-weighted returns of active fund managers were lower than those of their benchmarks in 15 of the 23 categories.
- Active fund managers investing in single countries in the eurozone largely failed to outperform their benchmarks over the one-year period.
- Notably, managers with a focus on French, Italian, Dutch, or Spanish Equity underperformed their benchmark by 5% or more on an asset-weighted basis.
- Only German equity managers were able to beat their benchmark, with funds in this category outperforming the S&P Germany BMI by 90 bps on an asset-weighted basis.
- Emerging market equity funds domiciled in Europe had a more favorable year compared with 2018.
- Funds denominated in GBP and EUR outperformed their benchmark by 64% and 50% in 2019, respectively.
- Over the 10-year period, the outperforming emerging market funds were still heavily outnumbered, with 15% and 4% of GBP- and EUR-denominated funds beating their benchmark, respectively.
- European active fund managers with a U.S. or global focus were predominantly outpaced by the S&P 500® and S&P Global 1200, respectively, over both short- and long-term periods in EUR terms.
- In 2019, 81% of euro-denominated U.S. equity funds underperformed their benchmark. Over the 10-year period, this rate increased to over 98%. The S&P 500 was up 34% in EUR terms in 2019 and outperformed the U.S. Equity fund category by 3.6% on an asset-weighted basis. Over the 10-year period, this figure rose to 3.8% per year.
- Similarly, the S&P Global 1200 was up 31% in EUR in 2019, and only 18% of European active funds focused on global equities were able to beat this performance. Fewer than 2% of funds in this category beat the benchmark over the 10-year period.
- Active UK equity funds had a better run than most in 2019; 73% of funds in this category beat the S&P United Kingdom BMI.
- The majority of funds in both the UK Equity and UK Large-/Mid-Cap Equity categories outperformed their benchmarks in 2019. However, over the same period, 60% of UK Small-Cap equity funds underperformed their benchmark. Furthermore, less than a third of funds outperformed over the 10-year period in each of these three categories.
- The strength seen in active UK equity funds did not apply to most of the other GBP-denominated fund categories, implying that UK fund managers may generally only have had an advantage on home soil.
- Two-thirds of pound sterling-denominated active equity funds in the Europe Ex-UK, Global, and U.S. Equity categories underperformed their benchmarks in 2019.