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SPIVA® South Africa Mid-Year 2020

SPIVA® Canada Mid-Year 2020

SPIVA® Europe Mid-Year 2020

SPIVA® Australia Mid-Year 2020

SPIVA® U.S. Mid-Year 2020

SPIVA® South Africa Mid-Year 2020

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Andrew Innes

Head of EMEA, Global Research & Design

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Andrew Cairns

Associate Director, Global Research & Design

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 (SPIVA) U.S. Scorecard in 2002.  The SPIVA South Africa Scorecard measures the performance of actively managed South African equity and fixed income funds denominated in South African rands (ZAR) against their respective benchmark indices over six-month and one-, three-, and five-year investment horizons.

MID-YEAR 2020 HIGHLIGHTS

South African Equity

Over 73% of South African Equity funds underperformed the S&P South Africa 50 over the first six months of the year.  Comparing the same funds with a broader benchmark, namely the S&P South Africa Domestic Shareholder Weighted (DSW) Capped Index, only 36% of funds underperformed.

The contrast in fortunes of the two benchmarks continued to highlight the relative strength of South African large-cap stocks when compared with small and mid caps.  The large-cap benchmark, the S&P South Africa 50, returned 4.5% more in the first six months of 2020 than South African Equity funds measured on an asset-weighted basis.  This large-cap benchmark dominance is also reflected over the five-year period, when 95% of South African Equity funds underperformed.  On an asset-weighted basis, these funds underperformed by 3.3% annually.

Fiscal stimulus was passed in April 2020 to help stave off the threat of a deepening economic contraction and interest rates were slashed by 2.75%.  Despite these efforts to spur the economy, South African Equity funds struggled to recover from the COVID-19-related drawdowns of 2020.  The 75th percentile of South African Equity funds was 3.9% lower over the first six months of the year.

The interquartile range, the difference between the first quartile and third quartile in Report 5, highlights the dispersion in performance considerably widened for South African Equity funds.  During the first six months of 2020, the spread was 7.7% compared with 3.5% over the five-year period—showcasing that volatile markets affected performance dispersion for equity funds.

Global Equity

The continued weakening of the South African rand versus other major currencies helped Global Equity funds return an impressive14.8% over the six-month period on an asset-weighted basis.  Despite this, 68% of Global Equity funds failed to keep pace with the S&P Global 1200 over the first six months of the year.  This figure increased to 90% when measured over the five-year period.  On an asset-weighted basis, Global Equity funds were 2% below the benchmark over the six-month period and 2.6% worse off over the five-year period.

Fixed Income

Over the first six months of 2020, 31% of funds in the Diversified/Aggregate Bond category failed to beat the S&P South Africa Sovereign Bond 1+ Year Index.  The same funds outperformed the benchmark by 1.2% on an asset-weighted basis.  When extended to the five-year period, 49% of funds underperformed the benchmark.

In the Short-Term Bond fund category, 54% of managers were unable to outperform the South Africa Short Term Fixed Interest (STeFI) Composite over the first six months of the year.  When compared with the longer-term five-year period, when 85% of funds outperformed the benchmark, it becomes clear that Short-Term Bond managers struggled to capitalize on the increased volatility and difficult market conditions brought on by the global COVID-19 pandemic.

Comparing fixed income and equity funds, the H1 2020 market turmoil took a greater toll on the latter.  Except for the S&P South Africa 50, the gains over the five-year period were completely eroded by the global COVID-19 crisis, whereas both the fixed income benchmarks and average fund managed to keep their head above water during the first six months of 2020.

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SPIVA® Canada Mid-Year 2020

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Berlinda Liu

Director, Global Research & Design

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Gaurav Sinha

Managing Director, Head of Americas Global Research & Design

Canadian stock markets experienced drastic volatility in the first half of 2020. The S&P/TSX Composite started strong, as January capped a stretch where the index posted positive returns in 7 out of 8 months, subsequently reaching an all-time high on Feb. 20, 2020. As the effects of the COVID-19 pandemic became apparent, the S&P/TSX Composite then fell a dizzying 37.2% in just 22 days, mirroring markets worldwide. A sharp bounce off the lows followed by an uncertain recovery left the index down 7.5% over the first six months of 2020. Smaller-cap names in the S&P/TSX Completion fell 11.8%, lagging the 6.3% decline of the S&P/TSX 60.

Although this volatile period offered ample opportunity for stock-pickers to shine, 88% of Canadian equity funds underperformed their benchmarks over the past year, in line with the 90% that did so over the past decade. This shortfall was not an outlier, as in six of seven categories, a majority of funds fell short of their benchmarks in the past year, and at least two-thirds of funds did so in every category over the past 10 years.

Canadian Equity funds were particularly notable for their level of underperformance. On an asset-weighted basis, Canadian Equity funds returned a dismal 7.9% below the S&P/TSX Composite over the past year, the worst relative performance of any fund category. Canadian Dividend & Income Equity funds provided a rare bright spot for active managers, with 69% outperforming over the past year, while dividend indices considerably lagged the market. In the 12-month period ending June 30, 2020, the broad-market S&P/TSX Composite fell 2.2%, whereas the S&P/TSX Canadian Dividend Aristocrats® lost 10.8%, the worst performance of any fund category benchmark. Over the 10-year window, this 8.6% deficit flipped to a 0.7% annualized outperformance for the S&P/TSX Canadian Dividend Aristocrats, while active fund managers reverted to form, with just 12% able to surpass the benchmark.

For Canadian Small-/Mid-Cap Equity managers, 52% underperformed the S&P/TSX Completion in the last year. Just 31% of Canadian Small-/Mid-Cap Equity funds beat the index for the decade, which was the most favorable performance of any category observed.

Among Canadian Focused Equity funds, 84% lagged the blended benchmark, which comprises the S&P/TSX Composite (50%), the S&P 500reg; (CAD) (25%), and the S&P EPAC LargeMidCap (25%). The fund category performed similarly in the SPIVA Canada Year-End 2019 Scorecard, when 85% underperformed the benchmark. Canadian Focused Equity funds were also notable for having the worst chances of beating the index over the past 10 years, with just 4 of 120 funds (3.3%) surpassing the blended target. Asset allocators punished these funds heavily, as only 40% of funds survived the decade, the worst survivorship of any category.

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SPIVA® Europe Mid-Year 2020

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Andrew Innes

Head of EMEA, Global Research & Design

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Andrew Cairns

Associate Director, Global Research & Design

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.

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SPIVA® Australia Mid-Year 2020

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Priscilla Luk

Managing Director, Global Research & Design, APAC

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Arpit Gupta

Senior Analyst, Global Research & Design

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Tim Wang

Senior Analyst, Global Research & Design

SUMMARY

  • S&P Dow Jones Indices has been the de facto scorekeeper of the ongoing active versus passive debate since the first publication of the SPIVA U.S. Scorecard in 2002. Over the years, we have built on our 18 years of experience publishing the report by expanding scorecard coverage into Australia, Canada, Europe, India, Japan, Latin America, and South Africa.
  • The SPIVA Australia Scorecard reports on the performance of Australian active funds against their respective benchmark indices over different time periods. In this scorecard, we evaluated returns of over 910 Australian equity funds (large, mid, and small cap, as well as A-REIT), 463 international equity funds, and 116 Australian bond funds.
  • Market sell-offs were seen in different Australian equity market segments in the first half of 2020 due to the COVID-19 pandemic, while Australian bonds recorded a small gain. Apart from A-REIT funds, the majority of funds in all categories suffered worse drawdowns versus their respective benchmark indices.
  • All fund categories recorded smaller average returns than their respective benchmark indices in the first half of 2020 on both equal- and asset-weighted bases. The same was observed for the 10- and15-year periods, except for the Australian Equity Mid- and Small-Cap category.

SPIVA Australia Mid-Year 2020 - Exhibit 1

  • Australian Equity General Funds: The S&P/ASX 200 lost 10.42% in the first half of 2020, while Australian Equity General funds recorded worse drawdowns of 11.66% and 11.39% on equal- and asset-weighted bases, respectively. Over the 6- and 12-month periods ending June 2020, 64.16% and 57.14% of funds in this category underperformed the benchmark, respectively.  Over the 10- and 15-year horizons, less than 20% of funds managed to survive and deliver higher returns than the benchmark.
  • Australian Equity Mid- and Small-Cap Funds: The S&P/ASX Mid-Small dropped 6.86% in the first six months of 2020, while the Australian Equity Mid- and Small-Cap funds recorded a bigger loss. Average fund return on an equal-weighted basis was worse than that based on an asset-weighted basis, indicating that funds with smaller assets tended to suffer more losses, which was inconsistent with observations over longer periods.  Over the 6- and 12-month periods ending June 2020, 55.64% and 49.61% of funds in this category did not outperform the benchmark, respectively.
  • International Equity General Funds: The international equity market suffered a smaller loss than the Australian equity market in the first half of 2020. The S&P Developed Ex-Australia LargeMidCap lost 3.20%, while International Equity General funds marked an equal-weighted average return of -3.88%, with 60.37% of funds underperforming the benchmark.  Over the 10- and 15-year periods, more than 90% of funds underperformed the S&P Developed Ex-Australia LargeMidCap.
  • Australian Bond Funds: The S&P/ASX Australian Fixed Interest 0+ Index recorded a gain of 3.59% in the first half of 2020, while Australian Bonds funds recorded smaller gains of 2.94% and 2.87% on equal- and asset-weighted bases, respectively. Over the 6- and 12-month periods ending June 2020, 73.13% and 68.12% of funds in this category underperformed the benchmark. 
  • Australian Equity A-REIT Funds: The S&P/ASX 200 A-REIT suffered a severe loss of 21.29% in the six-month period ending June 2020, while the Australian Equity A-REIT funds lost 22.06% and 22.21% on equal- and asset-weighted bases, respectively. Over the 6- and 12-month periods ending June 2020, 44.78% of funds in this category underperformed the benchmark, though a much higher portion of funds failed to beat the benchmark over longer periods.
  • Fund Survivorship: In spite of the COVID-19 pandemic, we did not see higher fund liquidation rates across all fund categories in the 12-month period ending June 2020, compared with previous scorecards. Of all Australian funds measured, 2.67% were merged or liquidated, with Australian Bond funds recording the highest liquidation rate of 4.35%.  In contrast, only 1.49% of Australian Equity A-REIT funds failed to survive.  Over longer horizons, only 78.85%, 63.09%, and 51.82% of funds across all categories survived the 5-, 10-, and 15-year periods, respectively.

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SPIVA® U.S. Mid-Year 2020

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Berlinda Liu

Director, Global Research & Design

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Gaurav Sinha

Managing Director, Head of Americas Global Research & Design

SUMMARY

Drastic volatility hit the U.S. stock market in the first half of 2020. The S&P 500® declined by 3.1%, with negative returns also posted by the S&P MidCap 400® (-12.8%) and the S&P SmallCap 600® (-17.9%).

The S&P 500 reached an all-time high on Feb. 19, 2020, followed by a rapid 33.8% drop through March 23, 2020, as pandemic-driven restrictions suppressed economic activity. In April, stocks rebounded and the S&P 500 posted its best monthly return since January 1987. Encouraged by government stimulus programs and the expectation of economic reopening, the stock market continued its recovery in May and June.

In 11 out of the 18 categories of domestic equity funds, the majority of funds continued to underperform their benchmarks. For example, 67% of domestic equity funds lagged the S&P Composite 1500® during the one-year period ending June 30, 2020. Additionally, the majority of large-cap (63%) and multi-cap (65%) funds lagged their benchmarks. In contrast, mid-cap and small-cap active funds performed relatively better. Approximately 56% of mid-cap and 53% of small-cap active managers outperformed their benchmarks for the one-year period (see Exhibit 1).

Domestic Equity Funds Underperforming Benchmarks in Trailing One-Year Period

Growth funds led across all capitalization segments in the one-year period; 74% of large-cap growth, 83% of mid-cap growth, and 89% of small-cap growth funds beat their benchmarks. However, their recent success was not enough to offset previous underperformance; 92% of large-cap growth, 74% of mid-cap growth, and 75% of small-cap growth funds underperformed over the past 15 years.

Value funds continued to lag their benchmarks over all time horizons; 73% of large-cap value, 59% of small-cap value, and 91% of multi-cap value funds underperformed their benchmarks over the past year. Mid-cap value funds were the only exception, with 62% outperforming the S&P MidCap 400 Value for the one-year period. For all investment horizons longer than three years, however, more than two-thirds of value funds across all capitalization segments underperformed their benchmarks.

Despite divergent results over the one-year horizon, both growth and value funds underperformed their benchmarks over the past decade. Large-cap (growth 82%, value 86%), mid-cap (60%, 81%), and small-cap (57%, 90%) all delivered painful results.

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