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 815 Japanese large- and mid/small-cap equity funds, along with more than 678 international equity funds investing in global, international, and emerging markets, as well as U.S. equities.
- Domestic Equity Funds: In 2018, the S&P/TOPIX 150 and the S&P Japan MidSmallCap suffered losses of 15.9% and 19.6%, respectively. Over the same period, 83.7% and 58.2% of large- and mid/small-cap equity funds underperformed their respective benchmarks, with average returns of -18.7% and -20.5%, respectively. The performance of domestic equity funds relative to their benchmark in 2018 was much worse than the observations in 2017, when the majority of funds outperformed the benchmark.
Over the 10-year horizon, 63.2% and 56.2% of large- and mid/small- cap funds underperformed their benchmarks, respectively. While the equal- and asset-weighted 10-year annualized returns for large-cap equity funds only differed by 0.14%, the equal-weighted 10-year annualized return of the mid/small-cap equity funds exceeded the asset-weighted return by 2.94%, indicating smaller funds in the mid/small-cap equity fund category delivered much better returns than the larger funds. - Foreign Equity Funds: In 2018, apart from the emerging market equity fund category, the majority of foreign equity funds underperformed their respective benchmarks and posted lower equal- and asset-weighted returns than their respective benchmarks. The S&P 500® recorded a loss of 4.7%, while U.S. equity funds had equal- and asset-weighted returns of -11.4% and -9.5%, respectively. In contrast, the S&P Emerging BMI had a return of -19.5%, while emerging market equity funds posted a lower drawdown of 18.0% and 17.6% on an equal- and asset-weighted basis, respectively.
Over the 10-year period, the majority of foreign equity funds underperformed their respective benchmarks. More than 90% of global, international, and emerging equity funds were outperformed by their respective benchmarks on an absolute and risk-adjusted basis. U.S. and global equity funds underperformed their respective benchmarks the most over the 10-year period (more than 300 bps). Foreign equity funds had 5- and 10-year survivorship rates of 72.9% and 57.9%, respectively, which is slightly lower than the rates for the domestic equity funds, where the 5- and 10-year survivorship rates were 80.1% and 72.9%, respectively.
