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SPIVA® Europe Mid-Year 2022

SPIVA U.S. Mid-Year 2022

SPIVA Institutional Scorecard Year-End 2021

SPIVA Australia Mid-Year 2022

Australian Persistence Scorecard: Year-End 2021

SPIVA® Europe Mid-Year 2022

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Benedek Vörös

Director, Index Investment Strategy

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Tim Edwards

Managing Director and Global Head of Index Investment Strategy

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Davide Di Gioia

Director, Index Investment Strategy

Since the first publication of the S&P Indices Versus Active Funds (SPIVA) U.S. Scorecard in 2002, S&P Dow Jones Indices has been the de facto scorekeeper of the ongoing active versus passive debate.  First published in 2014, the semiannual SPIVA Europe Scorecard reports on the performance of actively managed European equity funds as compared to the performance of category-appropriate S&P DJI benchmark indices, providing statistics on outperformance rates, survivorship rates and fund performance dispersion.

Mid-Year 2022 Highlights

A majority of actively managed funds underperformed their respective benchmark in nearly every fund category included in our Europe scorecard.  Among the major regional markets, Germany Equity funds had the best (i.e., lowest) underperformance rate in H1, at 55%, followed closely by underperformance rates of 57% and 58%, respectively, in U.K. Small-Cap Equity funds and Eurozone Equity funds.  The U.K. large-/mid-cap category saw the highest underperformance rate, with 96% underperforming the S&P United Kingdom LargeMidCap.  Pan-European equity funds lay in the middle, 84% undperformiing in H1 2022.  The relatively small Poland Equity category was the sole segment where a majority of active funds outperformed in H1 2022.

  • 82% of British pound sterling-denominated, and 84% euro-denominated actively managed pan-European equity funds underperformed the S&P Europe 350® in H1 2022, respectively, while only 58% of Eurozone funds underperformed the S&P Eurozone BMI.
  • Euro-denominated Global Equity funds maintained a relatively high underperformance rate over longer time horizons. Over the 10-year period ending June 2022, 98% of funds underperformed the S&P Global 1200.
  • British pound sterling-denominated U.S. Equity funds displayed a slight edge over their euro-denominated brethren; underperformance rates for the former were consistently below those of the latter across all time horizons.

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SPIVA U.S. Mid-Year 2022

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Tim Edwards

Managing Director and Global Head of Index Investment Strategy

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Anu R. Ganti

Senior Director, Index Investment Strategy

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Craig Lazzara

Managing Director, Core Product Management

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Joseph Nelesen, Ph.D.

Senior Director, Index Investment Strategy

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Davide Di Gioia

Director, Index Investment Strategy

SUMMARY

The S&P 500® made an all-time high on the first trading day of 2022, but as monetary taps tightened, U.S. equity markets turned bearish. The Federal Reserve had telegraphed its intention to raise rates before the year turned, but when the conflict in Ukraine triggered a spike in energy and raw commodity prices, producing a 40-year high in U.S. inflation, the central bank accelerated its plans. A series of rate hikes helped send the S&P 500 into a 20% drawdown by mid-June, and fixed income offered few safe harbors as yields rose across the curve and longer-dated Treasury bonds made their worst start to a year this century.

Declining markets make active management skills all the more valuable, and our report shows that a significant minority of active managers were able to outperform in several categories. After suffering an 85% underperformance rate in 2021, just 51% of large-cap domestic equity funds lagged the S&P 500 in the first six months of 2022, putting actively managed large-cap U.S. equity funds on track for their best (i.e., lowest) underperformance rate since 2009.

SPIVA U.S. Mid-Year 2022 Exhibit 1

Similarly, 54% of mid-cap and 63% of small-cap funds underperformed the S&P MidCap 400 and the S&P SmallCap 600, respectively, in H1. There was a wide range of performance across various domestic equity categories, topped by a creditable 33% of Mid-Cap Core funds underperforming in H1. At the other end of the spectrum, a turn to outperformance from value accompanied a disappointing period for growth managers, 79%, 84% and 89% of whom underperformed in the large-, small- and mid-cap Growth categories, respectively, in H1.

In international equities, a majority of actively managed funds underperformed in every category during H1 but, in relative terms, managers in the International Small-Cap category continued to outshine their peers, with just 57% underperforming compared to H1 underperformance rates of 68%, 71% and 74%, in the Global, International, and Emerging Market categories, respectively.

The February 2022 completion of the merger between IHS Markit and S&P Global brought a new range of fixed income indices to the S&P DJI stable, and this edition of our SPIVA U.S. Scorecard welcomes a new range of fixed income comparison indices, as well as several new fixed income categories. Highlights from the H1 fixed income statistics included 93% of Core Plus Bond funds and 59% of actively managed high-yield U.S. funds outperforming the iBoxx $ Liquid Investment Grade Index and iBoxx $ Liquid High Yield Index, respectively, but benchmark-beating returns were harder to find in the Loan Participation, General Municipal Debt and Intermediate U.S. Government categories—with underperformance rates of 83%, 86% and 89%, respectively.

Echoing a frequent theme of SPIVA Scorecards over the past 20 years, underperformance rates generally rose with the length of the period in which they were measured. Exhibit 2 illustrates the marked differences in the distributions of short- and longer-term underperformance rates across all the reported fund categories in our scorecard. While there was a broad mix of underperformance rates in H1, over a 15-year horizon, more than 70% of actively managed funds failed to outperform their comparison index in 38 out of 39 categories.

SPIVA U.S. Mid-Year 2022 Graph 2

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SPIVA Institutional Scorecard Year-End 2021

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Tim Edwards

Managing Director and Global Head of Index Investment Strategy

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Anu R. Ganti

Senior Director, Index Investment Strategy

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Craig Lazzara

Managing Director, Core Product Management

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Davide Di Gioia

Director, Index Investment Strategy

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 skill without the possible distortions that fees may create on performance comparisons. We also examine the impact of fees on both account types and illustrate the similarities and differences between the performances of open-end funds and segregated institutional accounts across categories.

Over the long term and gross-of-fees, underperformance among institutional domestic equity accounts was not meaningfully different from that of mutual funds. For example, 78% of both large-cap institutional accounts and large-cap mutual fund managers underperformed the S&P 500® over the 10-year period ending Dec. 31, 2021. After deducting fees (see section "About the SPIVA Institutional Scorecard"), there was a similarly small distinction between their underperformance rates, which both increased to 83% (see Exhibit 1).

Exhibit 1

Overall, 2021 continued to witness better performance from institutional accounts than from mutual funds, with lower 10-year underperformance rates (gross-of-fees) in 17 of the 21 reported equity segments. Nonetheless, in 16 out of 17 domestic equity fund categories, and in 3 out of 4 international equity categories, a majority of institutional accounts underperformed over a 10-year period. Underperformance rates ranged from 81% of large-cap core accounts to 46% of international small-cap equity accounts.

Volatility remained muted in 2021 in comparison to the pandemic-induced turmoil of 2020, but there were still opportunities for active managers to add value through security, sector and style selection during the year, as well as a moderate tailwind from equal weighting (rather than capitalization weighting) in large-cap U.S. equities. These two facts suggest conditions were not unfavorable for actively managed equity portfolios in 2021.

Several other details illustrate the opportunity set: most infamously, unprecedented price disconnections arose in widely-publicized "meme stocks," the extremes of which accompanied an all-time high in stock-level dispersion within the S&P SmallCap 600® in January 2021. But the opportunities for outperformance were not limited to smaller stocks, or just U.S. equities, with above-average dispersion observed across U.S. and global equity benchmarks during 2021. There were cross-geographic opportunities, too, as the S&P 500 completed its third consecutive year of double-digit gains, rising 29%, while the S&P/IFCI Composite gained less than 1% and the large-cap developed S&P International 700 rose 10% (see Reports 3 and 9). These returns created a tailwind for internationally benchmarked funds tempted by domestic allocations but a more challenging environment for domestic funds shopping abroad. Meanwhile, the S&P 500 Equal Weight Index outperformed the S&P 500 by 1% over the year, indicating that weighting by market capitalization may have been—all else equal—slightly disadvantageous.

Of course, since we cannot all be above average, the potential for above-average performance requires a possibility for below-average performance. Offering confirmation that 2021's markets were bristling with opportunities for active managers to fall behind, in 14 out of 17 domestic U.S. equity categories, a majority of institutional accounts underperformed, gross-of-fees, in 2021 (see Report 1). Chief among those categories was the large-cap U.S. growth category, within which 94% of actively managed institutional accounts underperformed the S&P 500 Growth, gross-of-fees. Conversely, the large-cap U.S. value category was a notable exception to the rule, where a creditable 26% underperformance rate was observed. The combination of the two statistics suggests that, in both categories, active managers may have been systematically allocating across the growth/value divide.

As might be expected given the international benchmarks' returns, much lower underperformance rates were observed in the international equity categories, including underperformance rates of 25% and 28%, respectively, in the international and international small-cap categories (see Report 6).

Conversely, in 12 of 17 reported fixed income categories, a majority of actively managed institutional accounts outperformed, gross-of-fees, in 2021 (see Report 11). While the outperformance rate generally decreased in every category over longer time horizons, a majority also outperformed in 9 out of the 17 categories over a 10-year horizon. There were nonetheless some pockets in which outperformance was harder to find: intriguingly, given the surge in domestic inflation that has rocked the U.S. fixed income markets in the first half of 2022, more than two-thirds of institutional accounts in the U.S. inflation-linked category underperformed in 2021, with a similar proportion underperforming over the past decade.

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SPIVA Australia Mid-Year 2022

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Benedek Vörös

Director, Index Investment Strategy

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Tim Edwards

Managing Director and Global Head of Index Investment Strategy

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Davide Di Gioia

Director, Index Investment Strategy

The SPIVA Australia Scorecard measures the performance of Australian actively managed funds against their respective benchmarks over various time horizons, covering large-, mid- and small-cap equity funds, real estate funds and bond funds, providing statistics on outperformance rates, survivorship rates and fund performance dispersion.

Since the first publication of the S&P Indices Versus Active Funds (SPIVA) U.S. Scorecard in 2002, S&P Dow Jones Indices has been the de facto scorekeeper of the ongoing active versus passive debate. 

Mid-Year 2022 Highlights

In the first half of 2022, outperformance was close to a coin flip for Australian Equity General funds, with 50% underperforming the S&P/ASX 200.  Over the same period, 40% of Australian Equity A-REIT funds underperformed their respective benchmarks, while a majority of funds lagged in the fixed income and small-cap equity categories.  An increasing majority of active funds underperformed in every reported category over longer-term horizons (see Exhibit 1 and Report 1).

  • Australian Equity General Funds: The S&P/ASX 200 dropped 9.9% in the first six months of the year, while Australian Equity General funds shed 10.0% and 11.0% on equal and asset-weighted bases, respectively. Of funds in this category, 49.8% underperformed the benchmark over the first half of the year, with underperformance rates rising to 73.6%, 77.2% and 82.9% over the 5-, 10- and 15-year horizons, respectively.
  • Australian Equity Mid- and Small-Cap Funds: The S&P/ASX Mid-Small gave up 20.3% in the six months ending June 30, 2022, and just 31.8% of Australian Equity Mid- and Small-Cap funds beat the index, while more than 81% underperformed on a risk-adjusted basis. Funds in this category lost 24.2% and 26.0% on equal- and asset-weighted bases, respectively, for the same period.  The longer-term record within the small- and mid-cap category was relatively stronger, with just 51.0% underperforming over 15 years.
  • International Equity General Funds: International equity funds returned -17.2% and
    -16.6% on equal and asset-weighted bases in the six-month period ending on June 30, 2022, with 56.9% of funds failing to keep up with the S&P Developed Ex-Australia LargeMidCap. Over the 5- and 10-year periods, more than 85% and 95% of funds underperformed, respectively.

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Australian Persistence Scorecard: Year-End 2021

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Priscilla Luk

Managing Director, Global Research & Design, APAC

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Tim Wang

Senior Analyst, Global Research & Design

EXECUTIVE SUMMARY

  • While comparing active funds against their respective benchmark indices is a typical practice to evaluate their performance, persistence is an additional test that can reveal fund managers’ skills in different market environments.
  • In this report, we measure the performance persistence of active funds that outperformed their peers and benchmarks over consecutive three- and five-year periods, and we analyze their transition matrices over subsequent periods.
  • Overall results suggested only a minority of Australian high-performing funds persisted in outperforming their respective benchmarks or consistently stayed in their respective top quartiles for three or five consecutive years.

  • Over the consecutive three-year period, 13.6% of funds consistently maintained top-quartile rankings and 29.4% of funds beat their benchmark consistently.
  • Over the consecutive five-year period, only 3.0% of funds consistently maintained top-quartile rankings and 4.4% of funds beat their benchmark consistently.
  • Top-quartile and outperforming Australian funds did not show strong persistence over two non-overlapping three- and five-year periods, though they tended to have lower liquidation rates.
  • Only 32% of funds maintained top-quartile rankings over two successive three-year periods and fewer (28%) did so for two successive five-year periods.

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