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 recovery trend that Latin American countries showed during the first half of 2021 was difficult to sustain during the second half of the year, especially for Brazilian equity markets, which ended the year in the red even in local currency. Inflationary pressures remained; in turn, central banks continued increasing interest rates. Although volatility continued to stabilize downward, it remained above pre-pandemic levels in the three countries covered in this report. Despite this environment, the majority of active managers across categories failed to outperform, especially over longer periods.
Brazil
- The Brazilian equity market dropped dramatically during the second half of 2021, with the S&P Brazil BMI falling 20.26% in the last six months of 2021 and ending the year down 14.89% (see Report 3). Large-cap and mid-/small-cap companies also suffered during the second half of 2021, returning -21.21% and -18.33%, respectively, as measured by the S&P Brazil LargeCap and S&P Brazil MidSmallCap. Additionally, the National Monetary Council reversed the policy interest rate (Selic) trend by increasing it 500 bps, from 4.25% to 9.25%, in the second half of 2021.
- Over the one-year period, 66.67% of Brazil Large-Cap Funds outperformed their benchmark, while most active fund managers underperformed their benchmarks in the other categories: 60.26% of Brazil Equity Funds and 67.65% of the Brazil Mid-/Small-Cap Funds. In addition, active managers from all categories, with the exception of Brazil Large-Cap Funds, fared poorly relative to their respective benchmarks over all periods observed, particularly in the mid-/small-cap category, where just 8.45% of managers were able to beat their benchmark over the 10-year period (see Report 1).
- The majority of Brazil Corporate Bond Funds underperformed their benchmarks over all periods observed, while 67.49% of Brazil Government Bond Funds were able to outperform their benchmark over the one-year period (see Report 1). Moreover, in this report, we observed poor survival rates for Brazil Corporate Bond Funds over the 5- and 10-year periods, with 26.88% and 31.67% surviving, respectively (see Report 2).
Chile
- Chile struggled to continue the recovery seen in the first half of 2021 over the second half of the year, leading to a 3.40% return for the 12-month period ending Dec. 31, 2021, as measured by the S&P Chile BMI.
- The majority of active equity fund managers underperformed the S&P Chile BMI over all periods studied, but the underperformance was especially high over the longer time periods, with 87.50% and 97.78% of active funds underperforming the benchmark over the 5- and 10-year periods, respectively (see Report 1). Funds underperformed the benchmark by medians of 1.79% and 2.25% over the 5- and 10-year periods, respectively (see Report 5).
- 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, while large funds performed relatively better in the one-year period, with a difference of 138 bps (see Report 4).
Mexico
- The S&P/BMV IRT gained 7.73% over the second half of 2021, resulting in a 24.38% return for the year. The majority of active managers underperformed the S&P/BMV IRT over all periods observed, with the worst result over the three-year period, with 91.49% of the funds underperforming their benchmark (see Report 1).
- Median fund underperformance was 6.28%, 3.61%, 3.53%, and 2.07% for the 1-, 3-, 5-, and 10-year periods, respectively (see Report 5). Not even managers in the first quartile managed to outperform the benchmark over any period.
- Despite the poor performance of active managers in the first half of the year, the survival rates of active funds in Mexico were the highest of Latin America, at 100%, 93.62%, 90.70%, and 77.78% over the 1-, 3-, 5-, and 10-year periods, respectively (see Report 2); this marked five scorecards in a row that the three- and five-year periods had the highest survivorship rate.
- Smaller funds performed relatively better than larger funds over the one-, three-, and five-year periods on an equal-weighted basis, especially over the three-year period, with 158 bps of difference. For the 10-year period, larger funds performed relatively better (see Report 3).
