Indexes Outperform Active Managers over Long Term

Standard&Poor’s Indices Versus Active Funds Scorecard (SPIVA) indicates that active fund managers underperform benchmarks over long periods of time.

According to an S&P Index Services’ press release, the SPIVA Scorecard shows that for the five-year period through June 30, the S&P 500 outperformed 68.6% of actively managed large-cap funds, the S&P MidCap 400 outperformed 75.9% of actively managed mid-cap funds, and the S&P SmallCap 600 outperformed 77.8% of actively managed small-cap funds.

Results were similar among global equity funds, according to the press release. Five year results show the S&P Global 1200 outperforming 70.1% of global equity funds, the S&P International 700 outperforming 86.5% of international equity funds, and S&P IFCI Composite outperforming 73.9% of emerging market funds.

Among fixed income funds, more than three quarters of actively managed domestic bond funds were outperformed by benchmarks in all categories over a five year horizon. Emerging market bond funds was the only category in which a majority of active managers beat the benchmark.

“The percentage of active managers underperforming benchmarks over five years is higher for fixed income funds compared to equity funds,” said Rosanne Pane, director at Standard & Poor’s Index Services, in the press release.

Standard & Poor’s Index Services reintroduced an enhanced version of its SPIVA, which it says now offers broader asset class coverage and mutual fund data derived from CRSP Survivor-Bias-Free U.S. Mutual Fund Database.