Standard & Poor’s Indices Versus Active Funds Scorecard, Midyear 2009
Aug 25th, 2009 by Tim
Standard & Poors recently released the Midyear 2009 results for the Standard & Poor’s Indices Versus Active Funds Scorecard (SPVIA). The report is now published semi-annually, and the key findings are summarized below. The prior report was published for year end 2008 data, and reviewed on this blog post. You can read the full report here.
- As a result of the market volatility over the past year, domestic and international equity funds have performed in line or marginally ahead of
benchmarks. However, both taxable and tax exempt fixed income funds’ asset weighted returns trail benchmarks by large margins. - for the past five years through June 30, the S&P 500 beat 63% of actively managed large-cap funds, compared to 71.9% in the prior report
- The S&P MidCap 400 outperformed 73% of mid-cap funds, compared to 79.1% in the prior report
- S&P SmallCap 600 outperformed 57% of small-cap funds, compared to 85.5% in the prior report
- The five-year data is unequivocal for fixed income funds. Across all categories except emerging market debt, more than three-fourths of active managers have failed to beat fixed income benchmarks. Similarly, five-year asset-weighted average returns are lower for active funds in all but two categories
- Active management advocates will take some comfort in the latest data, which shows a active managers ahead in some categories on an asset-weighted basis, and an improvement in the fund-weighted data compared to the last report.
We often hear of the benefits of active management in times of market stress and volatility. One common assertion is that an active manager can alter a portfolio’s makeup to invest in defensive stocks or in cash to in anticipation or during a bear market. However, a recent Vanguard research paper determined that active managers “have not consistently delivered superior performance relative to a benchmark during such periods.” Higher costs, stock picking, and market timing again proves to be a difficult hurdle to overcome, in any market environment.