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 MENA Scorecard measures the performance of actively managed MENA equity funds denominated in local currencies against the performance of their respective S&P DJI benchmark indices over 1-, 3-, 5-, and 10-year investment horizons.
YEAR-END 2020 HIGHLIGHTS
The global pandemic of 2020 did not leave the Middle East and North Africa (MENA) economies unscathed. With oil revenues accounting for a large portion of the GDP of MENA countries, the economic slowdown as a result of the COVID-19 pandemic significantly affected the region. The impact on benchmark and fund returns, however, was not homogenous across regions.
- Of MENA Equity funds, 68% underperformed the S&P Pan Arab Composite over the one-year period. This number rose to 93% over the 10-year period.
- The unique market conditions of 2020 did not seem to provide widespread opportunities for active managers across MENA Equity funds. The S&P Pan Arab Composite LargeMidCap Index return was 1.4 percentage points higher than that of MENA Equity funds (on an asset-weighted average basis). When measured against the broader S&P Pan Arab Composite, this difference increased further to 3.2 percentage points.
- The outlook for MENA Equity funds was no better when measuring performance on a risk-adjusted basis. Over all time periods, more than 90% of funds underperformed both benchmarks after adjusting for risk.
- Funds focused on the Gulf Cooperation Council (GCC) experienced similar misfortunes, with 58% underperforming the S&P GCC Composite over the one-year period.
- Further highlighting the struggles of GCC Equity funds, when measured on an asset-weighted basis, the funds trailed the S&P GCC Composite benchmark by 4.8 percentage points over the one-year period. The benchmark outperformance continued over the 10-year period by 0.9 percentage points, annually.
- Over the three- and five-year periods, 80% and 94% of GCC Equity funds underperformed the benchmark on a risk-adjusted basis, respectively.
- Saudi Arabia Equity funds bucked the regional one-year trend, posting the strongest benchmark-relative outperformance of the three categories. For the one-year period, 23% of Saudi Arabia Equity funds underperformed the S&P Saudi Arabia. This outperformance figure flips the opposite way when the time horizon is extended to 10 years, when 78% of Saudi Arabia Equity funds underperformed the benchmark.
- Saudi Arabia Equity Funds obtained a remarkable 10.7% asset-weighted average return during 2020, beating the benchmark by 3.9 percentage points.
- The bottom quartile Saudi Arabia Equity fund posted a return of 10.1% for the one-year period, 3.3 percentage points above the benchmark.