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 different time horizons. Starting with this report, we expand the analysis to include the 10-year investment horizon in addition to the previously reported 1-, 3-, and 5-year investment horizons. The expansion to include a 10-year horizon enables us to look at how funds perform over full market cycles, capturing both bear and bull markets.
Brazil
- The Brazilian equity market heated up in the second half of 2018, rising 21.4% from July to December (as measured by the S&P Brazil BMI). The market returned 15.8% for the year, marking the third straight year of double-digit gains. Mid- and small-cap companies (as measured by the S&P Brazil MidSmallCap) led the way, returning 17.5%, while largecap companies (as measured by the S&P Brazil LargeCap) returned 15.1%.
- With the continued stabilization of inflation in 2018, returns for fixed income securities were lower than previous years. Corporate bonds (as measured by the Anbima Debentures Index) were up 9.1% and government bonds (as measured by the Anbima Market Index) gained 10.1%.
- 2018 saw the majority of active fund managers underperforming the category benchmark in four of the five categories. As we saw in the mid-year 2018 report, slightly more large-cap active managers (51.1%) were able to beat the benchmark than underperformed it. For this category, the one-year asset-weighted average fund return (17.1%) was higher than the equalweighted average fund return (15.1%). In general, this means that managers with more assets performed better than funds with smaller assets.
- Managers had little success when their performance was measured over the long term, as the majority of funds underperformed their respective benchmarks for the 3-, 5-, and 10-year horizons for all 5 categories.
Chile
- The Chilean equity market fell by nearly 8% in 2018 as measured by the S&P Chile BMI, a sharp reversal from the strong gains (33%) in 2017.
- In the downturn, the majority (60%) of active fund managers underperformed the S&P Chile BMI. This is an improvement from the numbers seen in 2017, when over 75% of managers underperformed that year; however, with advocates of active management saying that managers have the ability to weather the storm of down markets better than passive benchmarks, the numbers paint a different picture for the majority.
- The majority of managers also underperformed over the 3-, 5-, and 10-year investment horizons. The 10-year horizon ending in 2018 saw cycles of bull and bear markets, with 4 calendar years of negative equity returns and 6 years of positive returns. Over the same period, over 97% of managers underperformed the benchmark by an equal-weighted average of nearly 2% per year.
Mexico
- Uncertainty revolving around the new presidential regime in late 2018 affected Mexico’s equity market returns, as the S&P/BMV IRT fell 11.6% in the second half of 2018, which resulted in a fullyear return of -13.6%.
- In 2018, 58.2% of active equity fund managers beat the benchmark, as the equal-weighted average fund return was 1.2% higher than the benchmark return.
- Managers did not have the same success for the longer-term horizons. Over the 10-year period, 86% of managers underperformed the benchmark. Over the same period, the equal-weighted average fund return was 78 bps lower (annualized) than the benchmark, while the asset-weighted average was 25 bps lower (annualized).
