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 experience publishing the report by expanding scorecard coverage into Australia, Canada, Europe, India, South Africa, Latin America, and Japan. While this report will not end the debate on active versus passive investing in Japan, we hope to make a meaningful contribution by examining market segments in which one strategy works better than the other.
- The SPIVA Japan Scorecard reports on the performance of actively managed Japanese mutual funds against their respective benchmark indices over 1-, 3-, 5-, and 10-year investment horizons. In this scorecard, we evaluated returns of more than 798 Japanese large- and mid/small-cap equity funds, along with more than 656 international equity funds investing in global, international, and emerging markets, as well as U.S. equities.
- Domestic Equity Funds: In the 12-month period ending June 2018, the S&P/TOPIX 150 and the S&P Japan MidSmallCap gained 8.4% and 11.1%, respectively. Over the same period, 71% and 83% of large- and mid/small-cap equity funds outperformed their respective benchmarks, with average returns of 11.7% and 21.3%, respectively.
Over the 10-year horizon, more than 50% and 60% of large- and mid/small-cap funds underperformed their benchmarks, respectively, on absolute and risk-adjusted bases. Nevertheless, the equal- and assetweighted fund returns exceeded their respective benchmarks’ returns over the same period.
The domestic equity funds’ performance was better than the foreign equity funds’ performance in comparison with their respective benchmark indices, and domestic equity funds also had higher survivorship rate than foreign equity funds across the different measured periods. - Foreign Equity Funds: Over the 12-month period ending June 2018, foreign equity funds recorded worse performance compared with their respective benchmarks than domestic equity funds. The majority of foreign equity funds underperformed their respective benchmarks and posted lower equal- and asset-weighted returns than their respective benchmarks. Emerging market equity funds recorded the worst relative performance, with 99% of funds underperforming the S&P Emerging BMI.
Over the 10-year period, the majority of funds underperformed their respective benchmarks across various foreign fund categories. More than 90% of global, international, and emerging equity funds did not survive or underperformed their respective benchmarks on absolute and risk-adjusted bases. More than 40% of foreign equity funds were merged or liquidated over the 10-year period, with international equity funds having the highest survivorship rate (72%).
Among various foreign fund categories, the U.S. and emerging equity funds had higher return spreads (over 100 bps) between equal- and asset-weighted returns in the 5- and 10-year periods, indicating that smaller funds in these two categories tended to perform better than larger funds. Over the 10-year period, asset- and equal-weighted average annualized fund returns were below their respective benchmarks’ returns by more than 300 bps across all foreign fund categories.
