SUMMARY
The SPIVA Latin America Scorecard measures the performance of actively managed funds across Brazil, Chile and Mexico against their respective benchmarks over various time horizons, providing statistics on outperformance rates, survivorship rates and fund performance dispersion.
Year-End 2022 Highlights
In a year when the spread between best- and worst-performing Latin American benchmarks spanned more than 35%, underperformance rates among active managers significantly varied by country and asset class. Managers of equities in Mexico and bonds in Brazil fared better than most, with less than half of funds underperforming their benchmarks. In all other categories, the majority of active funds underperformed in 2022 and over longer periods (see Exhibit 1).
Mexico
- The S&P/BMV IRT lost 5.74% during calendar year 2022. The majority of active Mexico Equity fund managers fared well for the year, with less than one-third (28.89%) underperforming the benchmark. Over longer periods, outperformance was more fleeting, with 68.18%, 67.39% and 85.37% of managers underperforming the benchmark over 3-, 5- and 10-year periods, respectively (see Report 1a).
- Median active fund outperformance was 2.48% in 2022, but turned negative over longer time horizons, with median funds underperforming by 2.47%, 2.17% and 2.21% for the 3-, 5- and 10-year periods, respectively (see Report 5). Over the 10-year period, even the threshold for top-quartile managers lagged the benchmark by 0.56%.
- The survival rates of active funds in Mexico remained the highest in Latin America, at 100%, 97.73%, 89.13% and 75.61% over the 1-, 3-, 5- and 10-year periods, respectively (see Report 2); this marked six scorecards in a row that Mexico Equity funds had the highest three- and five-year period survivorship rates.
- Funds with greater assets performed relatively better than smaller funds in 2022, with average returns for Mexico Equity funds 2.77% higher on an asset-weighted basis than on an equal-weighted basis (see Reports 3 and 4).
Brazil
- Brazil’s equity market ended 2022 nearly flat for the year, with the S&P Brazil BMI up 0.07% (see Report 3). Large caps, as measured by the S&P Brazil LargeCap, fell 5.38%, outperforming mid- and small-cap companies, as measured by the S&P Brazil MidSmallCap, which finished the year down 10.70%.
- In 2022, 50.40% of active Brazil Mid-/Small-Cap funds underperformed their benchmark, while a larger majority of active equity funds underperformed their benchmarks in other categories. Meanwhile, 81.21% of Brazil Large-Cap funds and 61.06% of Brazil Equity funds underperformed their benchmarks. Active managers from all categories, with the exception of Brazil Large-Cap funds, fared poorly relative to their respective benchmarks over the longer 10-year period ending in 2022, with underperformance rates of 89.22%, 80.56% and 87.06% in the Brazil Equity, Brazil Large-Cap and Brazil Mid-/Small-Cap fund categories respectively (see Report 1a).
Chile
- Chile’s equity market stood out among global peers, with the S&P Chile BMI rising 25.17% for the 12-month period ending Dec. 31, 2022 (see Report 3).
- The majority of active Chile Equity fund managers underperformed the S&P Chile BMI over all periods studied, but the underperformance rate was especially high over longer time periods, with 80.00% and 95.45% of active funds underperforming the benchmark over the 5- and 10-year periods, respectively (see Report 1a). Funds underperformed the benchmark by medians of 1.83% and 2.70% over the 1- and 10-year periods, respectively (see Report 5).
- Over the one-year period, fund size was inconsequential to returns, with active Chile Equity funds rising 22.59% and 22.61% on equal-weighted and asset-weighted bases, respectively. Over the 10-year period ending in 2022, however, asset-weighted returns for Chile Equity funds averaged 0.44% while equal-weighted returns averaged 1.01%, indicating a relatively rare case where funds with higher assets generated slightly lower performance than their smaller peers (see Reports 3 and 4).
- Over the 10-year period, the threshold for top-quartile active fund managers trailed the benchmark by 1.22% (see Reports 3 and 5).
Fixed Income
- Among active fixed income managers, fewer than half of Brazil Corporate Bond funds and Brazil Government Bond funds underperformed their benchmarks in 2022 (see Report 1a). Brazil Corporate Bond funds and Brazil Government Bond funds outperformed their benchmarks by 1.75% and 1.84%, respectively, on an asset-weighted basis in 2022 (see Reports 3 and 4). Over longer periods, underperformance rates rose significantly, with 92.75% of Brazil Corporate Bond funds and 94.21% of Brazil Government Bond funds failing to beat their benchmarks for the 10-year period ending in 2022.
