SUMMARY
The S&P Indices Versus Active (SPIVA) Latin America Scorecard reports on the performance of actively managed mutual funds in Brazil, Chile, and Mexico against their respective category benchmarks over the 1-, 3-, 5-, and 10-year time horizons.
Brazil
- The multi-year equity bull market in Brazil, which began in 2016, continued this year, with the S&P Brazil BMI rising 16.4% during the first half of 2019. Mid- and small-cap companies (S&P Brazil MidSmallCap) led the way, up 21.1%, while large-cap companies (S&P Brazil LargeCap) lagged (returning 14.3%). For the 12-month period ending in June 2019, Brazilian equities returned 41.2%, with smaller-cap companies once again outpacing large caps (47.0% versus 38.9%).
- With inflation figures within the target range set by the National Monetary Council for 2019, interest rates were left unchanged in the first half of the year. The stability in rates proved beneficial for fixed income markets in the first six months of the year, as corporates were up 5.9% (as measured by Anbima Debentures Index) and government bonds were up 7.9% (as measured by Anbima Market Index). For the one-year period ending June 2019, corporates gained 11.7%, while government bonds were up 15.9%.
- Over all time horizons and fund categories, active managers in Brazil fared poorly relative to their respective benchmarks. Over the one-year period ending in June 2019, 70% of all equity managers underperformed the S&P Brazil BMI, with the figure increasing to 84% when measuring relative performance over the 5- and 10-year periods.
- For the 10-year horizon, larger funds performed relatively better than smaller funds in four of the five categories when comparing average fund performance on an equal-weighted versus assetweighted basis.
Chile
- Alongside lower-than-expected economic growth in the first half of the year, the Chilean equity market was relatively flat (-0.6%) in the first six months of 2019. Over the 12-month period ending in June 2019, the market declined 4.3%, as measured by the S&P Chile BMI.
- The majority (64%) of active equity fund managers underperformed the S&P Chile BMI over the past one-year period, with the median fund underperforming the benchmark by 1.1%.
- Longer time horizons paint a worse picture of fund performance, as 98% of funds underperformed the benchmark over the 10-year period. Perhaps not coming as a surprise due to the underperformance, funds in Chile have a poor survival rate—50% of all funds that were active at the beginning of the 10-year period were merged or liquidated as of June 2019.
Mexico
- Despite weakened economic growth in Mexico, the equity market rebounded in the first half of 2019, with the S&P/BMV IRT increasing 5.6%. The downturn seen in most global equity markets in the fourth quarter of 2018 was reflected in one-year return of -6.7% as of June 2019.
- Active managers were unable to repeat their relative success seen in the year-end 2018 report, when 58% of managers outperformed the benchmark. For the 12-month period ending in June 2019, 64% underperformed the S&P/BMV IRT, with a median underperformance of 1.3%. The longer the time horizon, the worse things got for managers, as 86% of funds underperformed the benchmark over the 10-year period.
- Mexico not only saw the highest survival rate for equity funds in Latin America, but also some of the highest globally. All funds survived over the 12-month period, with the survival rate above 90% for the three- and five-year periods.
