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 2020 HIGHLIGHTS
As the S&P Europe 350® experienced its highest levels of volatility since the 2008 financial crisis and the largest single-month drawdown in almost 20 years, the widely held belief that market volatility should create widespread opportunities for active managers remained unproven.
- Over the first six months of 2020, 42% of active euro-denominated Europe Equity funds underperformed the S&P Europe 350. This figure rose to 49% over 12 months and 87% over 10 years.
- As the S&P Europe 350 recovered modestly in the second quarter of the year to return -12.4% over six months, the average asset-weighted fund return in the category was -10.6% over the same period. On the same basis, the 25th percentile fund returned -14.9%.
- The interquartile range of equity funds performance, the difference between the 75th and 25th percentile funds, revealed a high dispersion of equity fund performance across the board. Taking Europe as an example, the six-month range was 8.13%, while the 10-year long-term range was 3.15%, highlighting that in highly volatile markets, fund performance also varied considerably.
- Few active fund categories showed immunity to the widespread market conditions. Of the 23 fund categories, 19 displayed negative returns on an asset-weighted basis for the six-month period.
- Despite significant drawdowns seen across the majority of active equity funds, there was no noticeable change in fund survivorship compared with the prior year. Of the active euro-denominated Europe Equity funds, 98% survived the six-month period. Interestingly, only 51% of funds in the same category survived the 10-year period.
Size Mattered in the U.K.
- The U.K. Equity category saw some notable differences over the first six months of the year. U.K. Small-Cap fund managers had far greater success at beating the benchmark than U.K. Large-/Mid-Cap Equity funds, as 78% and 48% outperformed their benchmarks, respectively.
- The S&P United Kingdom LargeMidCap returned 0.5% more than U.K. Large-/Mid-Cap Equity funds over the six-month period. In comparison, the S&P United Kingdom SmallCap lagged the U.K. Small-Cap Equity funds by 8% over the same period when measured on an asset-weighted basis.