SUMMARY
- The SPIVA Canada Scorecard reports on the performance of actively managed Canadian mutual funds versus that of their benchmarks, corrected for survivorship bias. It also shows equal- and asset-weighted peer averages.
- The index versus active debate has been a contentious subject for decades, and there are strong opinions on both sides. The SPIVA Scorecards are the de facto scorekeepers of this debate, reporting performance over 1-, 3-, 5-, and 10-year periods.
- All but one fund category underperformed their respective benchmarks on a relative basis over the one-year period ending Dec. 29, 2017. In other words, the majority of active managers across all categories failed to outperform their respective benchmarks, with the exception of Canada Dividend & Income Equity.
- Domestic Equities: Despite a slow start during the first six months of the year, the headline broad market indices posted high single-digit gains in 2017, with the S&P/TSX Composite and the S&P/TSX 60 returning 9.10% and 9.78%, respectively. Almost all of the returns came in during the second half of the year.
- Despite poor performance by the broad market indices during the first six months of the year, funds in the Canadian Equity category struggled to outperform the benchmark. The large majority of active managers investing in domestic equity underperformed the benchmark, with only 6.78% of Canadian equity funds outperforming the S&P/TSX Composite over the one-year period.
- Yield-focused active strategies fared well in 2017. Within the Canadian Dividend & Income Equity category, 57.89% of funds outperformed their respective benchmarks over the one-year period. However, over the 10-year period, no funds were able to outpace the S&P/TSX Canadian Dividend Aristocrats®.
- The one-year data also showed unfavorable results for actively managed funds in the Canadian Small-/Mid-Cap Equity category. Managers were not able to keep pace with the 7.04% return of the S&P/TSX Completion Index, which resulted in only 6.45% of managers outperforming the benchmark. Furthermore, on an asset-weighted basis, these funds had a one-year return of 2.40%, which represnts a 4.64% shortfall from the index.
- Over the same period, Canadian Focused Equity managers continued to be among the worst performers. Only 4.84% managed to outperform the blended index, which allocates 50% of its weight to the S&P/TSX Composite, 25% of its weight to the S&P 500® , and 25% of its weight to the S&P EPAC LargeMidCap.
- Over the longer term, the results were unequivocal across all domestic equity categories. The data for the five-year period showed the losing pattern repeating across all categories, as the majority of active managers underperformed their respective benchmarks. The 10-year period showed further struggles for active managers, with less than one-quarter of funds outperforming.
- Foreign Equities: Managers investing in U.S equities saw almost no change in their relative performance over the various periods compared with the mid-year 2017 scorecard. Only 30.59% of managers in this category were able to provide excess returns over the S&P 500 (CAD) in 2017. The data also showed that an even lower percentage of managers outperformed their benchmarks in the International Equity (26.92%) and Global Equity (20.97%) categories over the same period.
- Over the five-year period, only 10.00% of active International Equity funds and 5.63% of active Global Equity funds were able to beat their respective benchmarks. This statistic dropped to 6.06% and 2.45%, respectively, over the prior 10-year period ending Dec. 29, 2017.
- Managers investing in the U.S. Equity category continued to struggle, with only 1.11%, 2.20%, and 1.67% being able to outpace the S&P 500 (CAD) over the 3-, 5-, and 10-year periods, respectively.
