SUMMARY
The SPIVA Institutional Scorecard extends the S&P Indices Versus Active (SPIVA) U.S. Scorecard to consider institutional accounts in addition to the mutual funds. We also examine the impact of fees on both account types.
Overall, underperformance among institutional equity accounts was not meaningfully different from that reported for mutual funds. For example, 79% of large-cap institutional accounts and 82% of large-cap mutual fund managers underperformed the S&P 500® on a gross-of-fees basis over the past 10 years. Net-of-fees, underperformance by both fund types increased by approximately 7% (see Exhibit 1).
Gross-of fees, institutional accounts had a better chance of outperforming their benchmarks than their mutual fund counterparts in 16 of the 17 domestic equity fund categories tracked. Nonetheless, the majority of institutional accounts across all equity fund categories underperformed over the past 10 years, ranging from a high of 87% of multi-cap core funds to a low of 59% of mid-cap growth funds.
Among mutual funds, active international equity managers showed greater differences between the gross- and net-of-fees relative performance figures than their domestic fund peers. No such notable difference between categories was observed among institutional equity accounts.
Institutional fixed income funds typically performed better than their benchmarks, gross-of-fees, compared with their mutual fund counterparts.
For fixed income funds, fees had the greatest impact on performance in the emerging markets debt space. While 37% of institutional emerging markets hard currency funds failed to outperform the benchmark over the past 10 years gross-of-fees, 68% did so net-of-fees. On the mutual fund side, however, the impact of fees was even higher. Emerging markets debt funds suffered a change of 43 percentage points, from 57% underperforming the benchmark gross-of-fees to a full 100% of funds once fees were taken into account.
Focusing on just 2019, outperformance statistics of institutional accounts varied by market-cap segments, perhaps due to spreads in the benchmark returns. While 63% of large-cap funds fell short of the S&P 500’s 31.5% return, only 29% and 31% of the mid-cap and small-cap funds underperformed the S&P MidCap 400® (26.2%) and S&P SmallCap 600® (22.8%), respectively, perhaps reflecting fund managers' proclivity for hidden style drift.
Mid-cap growth funds offered the best relative performance among equity categories in 2019; an impressive 85% outclassed the S&P MidCap 400 Growth’s 26.3% gain.
The majority of institutional international equity fund managers underperformed in all four categories tracked over the past 10 years, although 64% of emerging markets funds did surpass the S&P/IFCI Composite in 2019.
Performance by institutional fixed income managers relative to their benchmarks over the past decade was mixed, as the majority of funds beat their benchmarks in 9 out of 17 categories. However, they had a relatively strong 2019, with the majority of funds outperforming in 13 of 17 categories.
Emerging markets local currency funds were the best category for outperformance, with 88% topping the benchmark in 2019. However, their impressive 2019 performance did not make up for an otherwise miserable decade, over which just 16% of funds outperformed, the worst of any fixed income category. Municipal funds had the worst showing of 2019, with 72% of managers failing to match the S&P National AMT-Free Municipal Bond Index.
