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. The SPIVA MENA Scorecard measures the performance of actively managed MENA equity funds denominated in local currencies against the performance of their respective S&P DJI benchmark indices over 1-, 3-, 5-, and 10-year investment horizons.
MID-YEAR 2021 HIGHLIGHTS
As the global economy bounced back from the COVID-19 crisis, oil income started to ramp up again for the Middle East and North Africa (MENA) countries. With successful vaccination campaigns and effective fiscal policies and reforms, economies in the MENA region continued to recover. Expectations of steady growth reflected onto stock market trends in the region during the first half of 2021.
MENA
- The S&P Pan Arab Composite LargeMidCap Index outperformed 92.9% of MENA Equity funds during the first half to 2021. Although this percentage decreases when including the 2020 COVID-19 market crash, the long-term 10-year figure was consistent, at 92.7%.
- Active fund managers performed similarly on a risk-adjusted basis, with 90.3% of funds unable to beat the benchmark over the three-year period. In the longer 10-year period, this percentage was the same as the absolute basis, at 92.7%.
- Over the one-year period, the S&P Pan Arab Composite LargeMidCap Index return was 5.6 percentage points higher than that of MENA Equity funds (on an asset-weighted average basis). This difference narrowed to 0.6% over the 10-year period.
- Only 41.5% of the funds analyzed within the MENA Equity fund category survived the 10-year period.
GCC
- Equity funds focused on the Gulf Cooperation Council (GCC) region did not fare better, with 92.6% underperforming the S&P GCC Composite over the six-month period.
- Analyzing the funds’ risk-adjusted performance did not improve the picture, as 96% of GCC Equity funds underperformed the benchmark over the same six-month period.
- When measured on an asset-weighted basis, the funds trailed the S&P GCC Composite benchmark by 8.1 percentage points over the six-month period. The S&P GCC Composite increased by 24.5% over the same period and by 46.9% over the one-year period.
- The benchmark outperformance continued over the long term, resulting in an asset-weighted outperformance of 1.6 percentage points annualized over 10 years.
Saudi Arabia
- Saudi Arabia Equity funds did not keep their strong benchmark-relative outperformance observed in 2020. For the six-month period, 90.9% of Saudi Arabia Equity funds underperformed the S&P Saudi Arabia.
- Despite a remarkable 27.2% asset-weighted average return during the first half of 2021, Saudi Arabia Equity funds trailed the benchmark by 3.5 percentage points, on an asset-weighted average basis.
- Over the longer 10-year period, the outcome of active managers improved by a small degree, with 63.6% underperforming the benchmark. On a risk-adjusted basis, even fewer, albeit a majority of 54.6%, active funds were beaten by the benchmark.
