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 upon our experience by expanding scorecard coverage into Australia, Canada, Europe, India, South Africa, Latin America, and Japan. While this report will not end the debate surrounding active versus passive investing in Japan, we hope to make a meaningful contribution by examining market segments in which one strategy performs 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 741 Japanese large- and mid/small-cap equity funds, along with more than 646 international equity funds investing in global, international, and emerging markets, as well as U.S. equities.
- Domestic Equity Funds: In 2019, the S&P/TOPIX 150 and the S&P Japan MidSmallCap gained 19.3% and 16.8%, respectively. Over the same period, 42.4% and 74.6% of large- and mid/small-cap equity funds beat their respective benchmarks, with equal-weighted average returns of 19.1% and 21.0%, respectively. The performance of domestic equity funds relative to their benchmark in 2019 was better than in 2018, with more funds outperforming the benchmark.
Over the 10-year horizon, 30.9% and 45.2% of large- and mid/small-cap funds managed to outperform their benchmarks, while 35.4% and 37.3% of funds were liquidated, respectively. The large-cap funds recorded equal- and asset-weighted average excess returns of 8 bps and -5 bps relative to benchmark, respectively, while the mid/small-cap funds reported excess returns of 2.53% and 0.32% on equal- and asset-weighted bases, respectively. Mid/small-cap funds tended to perform better than large-cap funds in Japan, as compared to their relative benchmark indices. - Foreign Equity Funds: In 2019, the relative performance of U.S. and international equity funds against their benchmarks was worse than in 2018, while the relative performance of emerging market equity funds improved. 8% and 67.7% of U.S. and international equity funds underperformed their respective benchmarks, while 56.2% and 56.8% of global and emerging market equity funds did not beat their benchmarks, respectively. For 2019, all foreign equity fund categories reported negative equal-weighted average returns relative to their benchmark indices, ranging from -0.84% (global equity funds) to -5.47% (U.S. equity funds). There was significant divergence between the asset- and equal-weighted average returns in the emerging market fund category, as the asset-weighted return was dominated by a few well-performing large funds.
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 underperformed their respective benchmarks on absolute and risk-adjusted bases. U.S. equity funds had the worst benchmark-relative performance, underperforming the benchmark by 5.3% and 6.4% on equal- and asset-weighted bases, respectively. Foreign equity funds had a 10-year survivorship rates of 56.3%, which was slightly lower than the rate for domestic equity funds (63.9%).
