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SPIVA® Latin America Mid-Year 2020

SPIVA Japan Mid-Year 2020

SPIVA® India Mid-Year 2020

SPIVA® South Africa Mid-Year 2020

SPIVA® Canada Mid-Year 2020

SPIVA® Latin America Mid-Year 2020

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María Sánchez

Director, Sustainability Index Product Management, U.S. Equity Indices

S&P Dow Jones Indices

SUMMARY

The S&P Indices Versus Active (SPIVA) Latin America Scorecard compares the performance of actively managed mutual funds in Brazil, Chile, and Mexico to their benchmarks over 1-, 3-, 5-, and 10-year periods.

March 2020 presented the largest single-month drawdown in at least 10 years for all categories. The majority of equity active managers in Chile and Mexico failed to outperform, especially over longer periods. The Brazilian large-cap segment did a bit better and active managers were able to beat their benchmark over the one- and three-year periods. However, even this advantage disappeared over longer periods. 

Brazil

  • After four years of double-digit returns in the Brazilian equity market, the S&P Brazil BMI fell 15.62% during the first half of the year. The COVID-19-driven sell-off had an impact on all Brazilian equity market segments. Large- and mid-small-cap companies presented negative returns of 15.81% and 15.20%, respectively, as measured by the S&P Brazil LargeCap and S&P Brazil MidSmallCap.
  • During the first half of 2020, the National Monetary Council cut policy interest rates (Selic) by 225 bps from 4.5% to 2.25%, as of June 30, 2020. In this low rate environment, equity funds in three segments (Brazil Equity Funds, Brazil Large-Cap Funds, and Brazil Mid-/Small-Cap Funds) posted noteworthy performance, despite the overall negative performance of the asset class. Survivorship rates for the one- and three-year horizons increased, compared with the SPIVA Latin America Year-End 2019 Scorecard, especially the Brazil Mid-/Small-Cap Funds and Brazil Equity Funds, which increased their three-year survivorship rate by 8.11% and 2.06%, respectively, (see Report 2 and Exhibit 1).
  • Over the one-year period, most active fund managers outperformed their benchmarks in three of the five categories: 57.65% of Brazil Equity Fund managers, 63.16% of the Brazil Large-Cap Fund managers, and 52.59% of the Brazil Corporate Bond Fund managers beat their benchmarks. Active managers from all categories fared poorly relative to their respective benchmarks over the 5- and 10-year periods (see Report 1).
  • All categories, except for Brazil Government Bond Funds, showed that over the one-year period, larger funds performed worse than smaller funds. However, over the 10-year horizon, larger funds performed better than smaller funds on an equal-weighted basis (see Report 3) versus an asset-weighted basis (see Report 4).

    Chile

    • The Chilean equity market continued its negative trend, returning -21.69% over the 12-month period ending in June 2020, as measured by the S&P Chile BMI. Volatility in Chile started before COVID-19 due to the civil unrest starting Oct. 18, 2019. 
    • The majority of active equity fund managers underperformed the S&P Chile BMI over the 3-, 5-, and 10 year periods, with the median of funds underperforming the benchmark by 1.68%, 2.71%, and 2.34%, respectively (see Report 5). The performance was worse over longer time horizons, with 93.02% and 100.00% of funds underperforming the benchmark over the 5- and 10-year periods, respectively.
    • Smaller funds performed relatively better than larger funds over all time horizons on an equalweighted basis (see Report 3) versus an asset-weighted basis (see Report 4).

    Mexico

    • The S&P/BMV IRT fell 12.81% over the first half of 2020. For the 12-month period ending June 30, 2020, the index was down 10.87%. The majority of active managers underperformed the S&P/BMV IRT over all periods observed. Despite the volatile circumstances over the 12-month period, 64.0% of funds underperformed the benchmark.
    • Median fund underperformance was 1.42%, 0.71%, 1.93%, and 1.69% for the 1-, 3-, 5-, and 10- year periods, respectively. The best managers in the category (first quartile) outperformed the S&P/BMV IRT by 96 bps over the 1- and 3-year periods, but could not sustain this outperformance for longer periods, ultimately underperforming by 16 bps over the 10-year horizon.
    • The survival rates over the one- and three-year horizons were reduced by 4.04% from the SPIVA Latin America Year-End 2019 Scorecard (see Exhibit 1). The three- and five-year survival rates of Mexico Equity Funds were the highest of Latin America, at 91.49% and 88.64%, respectively.

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    SPIVA Japan Mid-Year 2020

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    Priscilla Luk

    Managing Director, Global Research & Design, APAC

    S&P Dow Jones Indices

    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.
    • The SPIVA Japan Scorecard reports on the performance of actively managed Japanese mutual funds against their respective benchmark indices over 6-month and 1-, 3-, 5-, and 10-year investment horizons.

    • In this scorecard, we evaluated the returns of more than 743 Japanese large- and mid-/small-cap equity funds, along with more than 681 international equity funds investing in global, international, and emerging markets, as well as U.S. equities.
    • Drawdowns were seen in domestic and foreign equity benchmark indices in the first half of 2020 due to the COVID-19 pandemic, with Japanese mid- and small-cap and emerging market equity indices suffering bigger losses.
    • The majority of Japanese equity funds beat their respective benchmarks amid the COVID-19 pandemic, while the relative performance of foreign equity funds was disappointing. Over longer time periods, we also observed that domestic equity funds tended to have better performance than foreign equity funds compared with their respective benchmark indices.

    SPIVA Japan Mid-Year 2020: Exhibit 1

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    SPIVA® India Mid-Year 2020

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    Akash Jain

    Director, Global Research & Design

    S&P Dow Jones Indices

    S&P Dow Jones Indices has been the de facto scorekeeper of the ongoing active versus passive debate since the first publication of the S&P Indices Versus Active Funds (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, Japan, Latin America, and South Africa.

    The SPIVA India Scorecard compares the performance of actively managed Indian mutual funds with their respective benchmark indices over 1-, 3-, 5-, and 10-year investment horizons. In this scorecard, we studied the performance of three categories of actively managed equity funds and two categories of actively managed bond funds over the 1-, 3-, 5-, and 10-year periods ending in June 2020.

    A volatile H1 2020 saw the S&P BSE 100, the benchmark for large-cap funds in India, ending in the red (down 14.39%). Conversely, investors that tactically shifted asset allocations to Indian fixed income categories at the start of 2020 may have endured lower drawdowns, with the S&P BSE India Government Bond Index ending in the black (up 7.78%) in the same period.  The sharp correction in Q1 of calendar year 2020 was followed by a strong rebound in Q2 of calendar year 2020 with the S&P BSE 100 up 20.3%, supported by the economic relief package coupled with easing monetary policy. 

    For Indian equity categories in H1 2020, the equal-weighted fund returns were higher than their respective asset-weighted and index returns, suggesting that smaller-sized funds were able to better navigate this volatile period than their larger peers. 

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    SPIVA® South Africa Mid-Year 2020

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    Andrew Innes

    Head of Global Research & Design

    S&P Dow Jones Indices

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    Andrew Cairns

    Senior Director, Global Research & Design

    S&P Dow Jones Indices

    S&P Dow Jones Indices has been the de facto scorekeeper of the ongoing active versus passive debate since the first publication of the S&P Indices Versus Active (SPIVA) U.S. Scorecard in 2002.  The SPIVA South Africa Scorecard measures the performance of actively managed South African equity and fixed income funds denominated in South African rands (ZAR) against their respective benchmark indices over six-month and one-, three-, and five-year investment horizons.

    MID-YEAR 2020 HIGHLIGHTS

    South African Equity

    Over 73% of South African Equity funds underperformed the S&P South Africa 50 over the first six months of the year.  Comparing the same funds with a broader benchmark, namely the S&P South Africa Domestic Shareholder Weighted (DSW) Capped Index, only 36% of funds underperformed.

    The contrast in fortunes of the two benchmarks continued to highlight the relative strength of South African large-cap stocks when compared with small and mid caps.  The large-cap benchmark, the S&P South Africa 50, returned 4.5% more in the first six months of 2020 than South African Equity funds measured on an asset-weighted basis.  This large-cap benchmark dominance is also reflected over the five-year period, when 95% of South African Equity funds underperformed.  On an asset-weighted basis, these funds underperformed by 3.3% annually.

    Fiscal stimulus was passed in April 2020 to help stave off the threat of a deepening economic contraction and interest rates were slashed by 2.75%.  Despite these efforts to spur the economy, South African Equity funds struggled to recover from the COVID-19-related drawdowns of 2020.  The 75th percentile of South African Equity funds was 3.9% lower over the first six months of the year.

    The interquartile range, the difference between the first quartile and third quartile in Report 5, highlights the dispersion in performance considerably widened for South African Equity funds.  During the first six months of 2020, the spread was 7.7% compared with 3.5% over the five-year period—showcasing that volatile markets affected performance dispersion for equity funds.

    Global Equity

    The continued weakening of the South African rand versus other major currencies helped Global Equity funds return an impressive14.8% over the six-month period on an asset-weighted basis.  Despite this, 68% of Global Equity funds failed to keep pace with the S&P Global 1200 over the first six months of the year.  This figure increased to 90% when measured over the five-year period.  On an asset-weighted basis, Global Equity funds were 2% below the benchmark over the six-month period and 2.6% worse off over the five-year period.

    Fixed Income

    Over the first six months of 2020, 31% of funds in the Diversified/Aggregate Bond category failed to beat the S&P South Africa Sovereign Bond 1+ Year Index.  The same funds outperformed the benchmark by 1.2% on an asset-weighted basis.  When extended to the five-year period, 49% of funds underperformed the benchmark.

    In the Short-Term Bond fund category, 54% of managers were unable to outperform the South Africa Short Term Fixed Interest (STeFI) Composite over the first six months of the year.  When compared with the longer-term five-year period, when 85% of funds outperformed the benchmark, it becomes clear that Short-Term Bond managers struggled to capitalize on the increased volatility and difficult market conditions brought on by the global COVID-19 pandemic.

    Comparing fixed income and equity funds, the H1 2020 market turmoil took a greater toll on the latter.  Except for the S&P South Africa 50, the gains over the five-year period were completely eroded by the global COVID-19 crisis, whereas both the fixed income benchmarks and average fund managed to keep their head above water during the first six months of 2020.

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    SPIVA® Canada Mid-Year 2020

    Canadian stock markets experienced drastic volatility in the first half of 2020. The S&P/TSX Composite started strong, as January capped a stretch where the index posted positive returns in 7 out of 8 months, subsequently reaching an all-time high on Feb. 20, 2020. As the effects of the COVID-19 pandemic became apparent, the S&P/TSX Composite then fell a dizzying 37.2% in just 22 days, mirroring markets worldwide. A sharp bounce off the lows followed by an uncertain recovery left the index down 7.5% over the first six months of 2020. Smaller-cap names in the S&P/TSX Completion fell 11.8%, lagging the 6.3% decline of the S&P/TSX 60.

    Although this volatile period offered ample opportunity for stock-pickers to shine, 88% of Canadian equity funds underperformed their benchmarks over the past year, in line with the 90% that did so over the past decade. This shortfall was not an outlier, as in six of seven categories, a majority of funds fell short of their benchmarks in the past year, and at least two-thirds of funds did so in every category over the past 10 years.

    SPIVA Canada Mid-Year 2020: Exhibit 1

    Canadian Equity funds were particularly notable for their level of underperformance. On an asset-weighted basis, Canadian Equity funds returned a dismal 7.9% below the S&P/TSX Composite over the past year, the worst relative performance of any fund category. Canadian Dividend & Income Equity funds provided a rare bright spot for active managers, with 69% outperforming over the past year, while dividend indices considerably lagged the market. In the 12-month period ending June 30, 2020, the broad-market S&P/TSX Composite fell 2.2%, whereas the S&P/TSX Canadian Dividend Aristocrats® lost 10.8%, the worst performance of any fund category benchmark. Over the 10-year window, this 8.6% deficit flipped to a 0.7% annualized outperformance for the S&P/TSX Canadian Dividend Aristocrats, while active fund managers reverted to form, with just 12% able to surpass the benchmark.

    For Canadian Small-/Mid-Cap Equity managers, 52% underperformed the S&P/TSX Completion in the last year. Just 31% of Canadian Small-/Mid-Cap Equity funds beat the index for the decade, which was the most favorable performance of any category observed.

    Among Canadian Focused Equity funds, 84% lagged the blended benchmark, which comprises the S&P/TSX Composite (50%), the S&P 500reg; (CAD) (25%), and the S&P EPAC LargeMidCap (25%). The fund category performed similarly in the SPIVA Canada Year-End 2019 Scorecard, when 85% underperformed the benchmark. Canadian Focused Equity funds were also notable for having the worst chances of beating the index over the past 10 years, with just 4 of 120 funds (3.3%) surpassing the blended target. Asset allocators punished these funds heavily, as only 40% of funds survived the decade, the worst survivorship of any category.

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