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.
The year 2020 was a volatile one for financial markets. After a significant sell-off during the first quarter, markets rebounded later in the year. However, the recovery was marked with uncertainty. Despite this higher volatility, the majority of active managers failed to outperform, especially over longer periods. The Chile Equity Fund category did slightly better and active managers were able to beat their benchmark over the one-year period. However, even this advantage disappeared over longer periods.
Brazil
- After falling 15.62% the first half of the year, the S&P Brazil BMI gained 26.90% during the second half. The Brazilian equity market finished 2020 up 7.08% (see Report 3). Large- and mid-small-cap companies also recovered during the last six months of 2020, returning 28.99% and 21.39%, respectively, as measured by the S&P Brazil LargeCap and S&P Brazil MidSmallCap. In August 2020, the National Monetary Council cut policy interest rates (Selic) by 25 bps, from 2.25% to 2.00%, and held rates steady for the rest of the year. This helped financial markets rebound during the second half of the year.
- Over the one-year period, most active fund managers underperformed their benchmarks in all categories: 74.14% of Brazil Equity Fund managers, 88.80% of the Brazil Large-Cap Fund managers, and 63.22% of the Brazil Mid-/Small-Cap Fund managers did not beat their benchmarks. In addition, 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 Brazil Government Bond Funds, showed that over the one-year period, larger funds (by assets) performed worse than their smaller peers, especially Brazil Mid-/Small-Cap 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 5.34% recovery seen in the Chilean equities market during the latter half of 2020 was not enough to close the year positive. Overall, Chilean equities closed the year down 10.08% over the 12-month period ending in December 2020, as measured by the S&P Chile BMI.
- 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 1.66%, 2.96%, and 2.60%, respectively (see Report 5). The performance was worse over longer time horizons, with 95.24% and 97.73% of funds underperforming the benchmark over the 5- and 10-year periods, respectively (see Report 1).
- • Smaller funds performed relatively better than larger funds over 3-, 5-, and 10-year periods on an equal-weighted basis (see Report 3) versus an asset-weighted basis (see Report 4). Over the one-year period, larger funds performed better by 29 bps.
Mexico
- The S&P/BMV IRT gained 18.54% over the second half of 2020. However, the index returned 3.35% for the year. The majority of active managers underperformed the S&P/BMV IRT over all periods observed (see Report 1).
- Median fund underperformance was 2.63%, 1.73%, 3.13%, and 1.23% for the 1-, 3-, 5-, and 10-year periods, respectively (see Report 5). The highest-performing managers in the category (first quartile) outperformed the S&P/BMV IRT by 112 bps and 107 bps over the one- and three-year periods, respectively. They could not sustain this outperformance for longer periods and underperformed by 26 bps and 15 bps over trailing 5- and 10-year horizons, respectively.
- The survival rates of Mexico Equity Funds were the highest of Latin America, at 97.96%, 92%, 91.11%, and 75.76%, over the 1-, 3-, 5-, and 10-year periods, respectively (see Report 2).
