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SPIVA® South Africa Mid-Year 2019

SPIVA® Japan Mid-Year 2019

SPIVA® Europe Mid-Year 2019

SPIVA® Institutional Scorecard Year-End 2018

SPIVA® Australia Mid-Year 2019

SPIVA® South Africa Mid-Year 2019

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Zack Bezuidenhoudt

Director, Client Coverage Israel, Benelux, Nordics, and U.K.

S&P Dow Jones Indices

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Andrew Innes

Head of Global Research & Design

S&P Dow Jones Indices

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Andrew Cairns

Senior Director, Global Research & Design

S&P Dow Jones Indices

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 (SPIVA) U.S. Scorecard in 2002. The SPIVA South Africa Scorecard measures the performance of actively managed, South African equity and fixed income funds denominated in South African rands (ZAR) against their respective benchmark indices over one-, three-, and five-year investment horizons.

MID-YEAR 2019 HIGHLIGHTS

South African Equities

Over 62% of South African active equity funds failed to outperform the S&P South Africa Domestic Shareholder Weighted (DSW) Capped Index over the one-year period ending June 30, 2019. This figure rose to 74% when observed over the five-year period.

The South African equity market recovered in the first half of 2019, following a similar pattern seen more broadly in global equities after the sell-off at the tail end of 2018. The recovery was accompanied by a less optimistic local backdrop, with a volatile and depreciating South African rand and the fear of a ratings downgrade still looming. National elections in May saw the African National Congress retain control of the government. However, the party’s majority and voter turnout weakened as a result of the struggling economy, high unemployment, and further revelations of corruption.

Over the one-year period, active funds fared worse in general than the benchmark; the S&P South Africa DSW Capped Index rebounded to post a 1.7% gain, compared with 0.5% for active funds on an asset-weighted basis. The S&P South Africa 50 was up 5.3% over the same period, illustrating the general outperformance of large-cap companies over their smaller peers.

Many local S&P DJI factor-based indices also outperformed the S&P South Africa DSW Capped Index over the one-year period. Notable outperformers included the S&P Momentum South Africa and the S&P South Africa Composite Quality, Value and Momentum Multi-factor Index, outperforming by 8.5% and 6.3%, respectively.

The South African government outlined its commitment to mitigate greenhouse gas emissions and signed into law the Carbon Tax Act, which went into effect in June 2019. Interestingly, the S&P South Africa Composite Carbon Price Risk 2030 Adjusted Index outperformed its benchmark, with a return of 3.8% over the one-year period, as did the S&P South Africa DSW Capped Carbon Efficient Index and S&P South Africa DSW Capped ESG Index, which were up 4.8% and 2.0%, respectively.


Global Equities

Fewer than 11% of local funds invested in global equities managed to outperform the S&P Global 1200 over the one-year period. The benchmark outperformed active funds by an average of 6.5% when measured on an asset-weighted basis over the same period. Over the five-year period, the proportion of outperforming global equity funds was even lower, with only 3% beating the benchmark.


Fixed Income

Across all categories analyzed in the SPIVA South Africa Scorecard, the top-performing benchmark was the S&P South Africa Sovereign Bond 1+ Year Index, posting a 11.25% gain over the one-year period. Within the Diversified/Aggregate Bond category, 82% of funds benchmarked against this index underperformed.

Over the one-year period, 94% of Short-Term Bond funds outperformed the South Africa Short Term Fixed Interest (STeFI) Composite. This outperformance persisted across the three- and five-year periods.

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SPIVA® Japan Mid-Year 2019

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Priscilla Luk

Managing Director, Global Research & Design, APAC

S&P Dow Jones Indices

SUMMARY

  • S&P Dow Jones Indices has been the de facto scorekeeper of the ongoing active versus passive debate since we first published the SPIVA U.S. Scorecard in 2002. Over the years, we have expanded the scorecard coverage into Australia, Canada, Europe, India, South Africa, Latin America, and Japan.
  • The SPIVA Japan Scorecard reports on the performance of actively managed Japanese mutual funds against their respective benchmark indices over 1-, 3-, 5-, and 10-year investment horizons.
  • In this scorecard, we evaluated the returns of more than 829 Japanese large- and mid-/small-cap equity funds, along with more than 703 international equity funds investing in global, international, and emerging markets, as well as U.S. equities.
  • Benchmark indices for the domestic and foreign equity markets recovered in the first half of 2019; however, the Japanese large-cap funds and the majority of foreign equity fund categories recorded lower equal-weighted average returns than their respective benchmarks.
  • There was no consistent trend in the yearly active versus index figures, but we have consistently observed underperformance for the majority of Japanese active funds in most categories over the 10-year period.

  • Domestic Equity Funds: In the 12-month period ending June 2019, the S&P/TOPIX 150 and the S&P Japan MidSmallCap lost 5.6% and 11.7%, respectively. Over the same period, 93% and 69% of large- and mid-/small-cap equity funds underperformed their respective benchmarks, with average losses of 10.4% and 13.4%, respectively.

    Over the 10-year horizon, more than 70% and 50% of large- and mid-/small-cap funds underperformed their benchmarks, respectively, on absolute and risk-adjusted bases. Nevertheless, the equal- and asset-weighted fund returns of the mid-/small-cap funds exceeded their respective benchmarks’ returns over the same period.

    Compared with the benchmark indices, the domestic equity funds performed better than the foreign equity funds over the longer periods, and domestic equity funds also had a lower liquidation rate than foreign equity funds.

  • Foreign Equity Funds: Over the 12-month period ending June 2019, emerging market equity funds recorded the best relative performance among all the foreign equity fund categories, with more than half of funds outperforming the S&P Emerging BMI. However, a majority of funds in the remaining foreign equity fund categories failed to beat the benchmark indices, and they recorded a lower average return than the benchmark.

    Over the 10-year period, the majority of funds underperformed their respective benchmarks across various foreign fund categories. Less than 15% of foreign equity funds survived and outperformed their respective benchmarks on absolute and risk-adjusted bases. More than 40% of foreign equity funds were merged or liquidated over the 10-year period.

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SPIVA® Europe Mid-Year 2019

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Andrew Innes

Head of Global Research & Design

S&P Dow Jones Indices

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Andrew Cairns

Senior Director, Global Research & Design

S&P Dow Jones Indices

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 Europe Scorecard measures the performance of actively managed European equity funds denominated in euro (EUR), British pound sterling (GBP), and other European local currencies against the performance of their respective S&P DJI benchmark indices over 1-, 3-, 5-, and 10-year investment horizons.

MID-YEAR 2019 HIGHLIGHTS

  • Over the one-year period ending June 30, 2019, 90% of active panEuropean equity funds underperformed their passive benchmarks.
    • The group’s asset-weighted return for the period was negative, while the S&P Europe 350® benchmark was up 5.3%.
  • Emerging market equity funds domiciled in Europe bucked the trend over the one-year period compared with other active fund categories, with 52% of GBP- and 42% of EUR-denominated funds outperforming their benchmark.
    • Despite their notable performance over the one-year period, 87% of GBP- and 95% of EUR-denominated emerging market equity funds underperformed their benchmark over the 10-year period ending June 30, 2019.
    • Additionally, on an asset-weighted basis, the EUR-denominated emerging market equity fund category underperformed its benchmark by over 2% annually over the same 10-year period.
  • Markets continued to contend with global trade tensions that have contributed to an economic slowdown in Germany, Europe’s largest exporter. German equity was the only euro-denominated fund category in which the benchmark, the S&P Germany BMI, experienced negative returns over the one-year period, at -1.2%.
    • Active funds investing in Germany were largely unable to outmaneuver the downtrend and delivered a return of -4.4% on an asset-weighted basis over the same period.
  • The steep declines seen across equity markets in late 2018 were accompanied by near-ubiquitous underperformance across the fund categories’ asset-weighted returns. As markets improved in the first half of 2019, active managers were generally not able to make up for lost ground. Among the 23 categories of active funds domiciled in Europe, all but three underperformed over the one-year period ending June 30, 2019.
    • Most notably, active funds over the one-year period in:
      • French equities were down 2.6% (8.8% below the S&P France BMI); and
      • Spanish equities were down 7.1% (8.0% below the S&P Spain BMI).
  • It has been over three years since the Brexit referendum was held on June 23, 2016. In the threeyear period from mid 2016, UK small-cap equity funds outperformed the S&P United Kingdom SmallCap by 3.4% per year on an asset-weighted basis. The past year, however, marked a stark reversal, with the same category underperforming the benchmark by 3.7% on the same basis.
    • Over the three-year period, 70% of UK small-cap funds outperformed their benchmark, which was the highest rate among all fund categories. Other active UK equity categories also fared well over the period.
    • Over the more recent one-year period, fund managers were largely unable to capitalize on the looming Brexit uncertainty, with 80% of all UK-focused funds underperforming their benchmarks.
  • From the perspective of a European investor, U.S. and global equity markets significantly outperformed the local markets. A strong U.S. dollar persisted over the one-year period and contributed to the S&P 500® and S&P Global 1200 increasing 13.2% and 9.9% in euro terms, respectively.

    • Of those active funds domiciled in Europe, fewer than 16% covering U.S. equities or 13% covering global equities were able to outperform their benchmark over the one-year period.
    • These figures declined to fewer than 3% and 2%, respectively, over the 10-year period.

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SPIVA® Institutional Scorecard Year-End 2018

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Hamish Preston

Head of U.S. Equities

S&P Dow Jones Indices

EXECUTIVE SUMMARY

  • This report adds institutional accounts to the mutual funds analyzed in the S&P Indices Versus Active (SPIVA) U.S. Scorecards. We also examine the impact of fees.
  • Overall, underperformance among institutional equity accounts was not meaningfully different from that reported for mutual funds. For example, 77.97% of large-cap mutual fund managers and 73.21% of institutional accounts underperformed the S&P 500® on a gross-of-fees basis over the 10-year horizon.
  • 2018 proved challenging for institutional equity managers: the majority of U.S. equity funds in most categories, and most international equity funds in all categories, underperformed last year.
  • Mid-cap growth funds offered the best relative performance among equity categories in 2018; an impressive 81.60% outperformed the S&P MidCap 400® Growth’s 10.34% decline last year.
  • Institutional fixed income managers showed strength in many categories in 2018; the majority outperformed in 11 out of 17 categories, gross-of-fees.

  • Highlighting how difficult it can be to beat benchmarks over longer horizons, the majority of institutional managers in all but one equity category underperformed over the 10-year horizon, gross-of-fees. International small-cap funds offered the exception.
  • However, incorporating a profitability screen in international small caps would have removed this exception. Most (52.46%) institutional international small-cap funds would have underperformed the S&P Developed Ex U.S. SmallCap Select Index’s 10.76% annualized total returns over the 10-year period ending Dec. 31, 2018.
  • Active equity managers focusing on market segments perceived to be relatively inefficient appeared to charge higher fees than their peers in other categories. There were typically greater differences between the gross- and net-of-fees relative performance figures in domestic and international small-cap categories, as well as for emerging market funds.
  • Institutional fixed income funds typically performed better than their benchmarks, grossof-fees, compared with their mutual fund counterparts. However, California municipal debt mutual funds posted the best relative performance figures over the 10-year horizon, gross-offees.
  • Fees appeared to have a sizeable impact on the relative performance of mutual funds in the mortgage-backed securities (MBS) and municipal bond categories.
  • For example, while 64.81% of MBS mutual funds underperformed, gross-of-fees, over the 10-year horizon, 42.59% underperformed net-of-fees. This 22.22 percentage point difference was one of the largest across any fixed income category over the 10-year horizon.
  • We report only gross-of-fees returns for institutional fixed income funds in the global corporate investment-grade and global corporate high-yield categories. Only three funds in each category posted a complete history of net returns and assets under management over the 10-year horizon.

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SPIVA® Australia Mid-Year 2019

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Priscilla Luk

Managing Director, Global Research & Design, APAC

S&P Dow Jones Indices

SUMMARY

  • S&P Dow Jones Indices has been the de facto scorekeeper of the ongoing active versus passive debate since the first publication of the SPIVA U.S. Scorecard in 2002. Over the years, we have built on our 16 years of experience publishing the report by expanding scorecard coverage into Australia, Canada, Europe, India, Japan, Latin America, and South Africa.
  • The SPIVA Australia Scorecard reports on the performance of Australian active funds against their respective benchmark indices over 1-, 3-, 5-, 10-, and 15-year periods.1 In this scorecard, we evaluated returns of over 854 Australian equity funds (large, mid, and small cap, as well as A-REIT), 436 international equity funds, and 116 Australian bond funds.
  • Benchmark indices for all fund categories rebounded in the first half of 2019, though the majority of funds in all categories failed to deliver better returns than their respective benchmark indices, and they recorded smaller average returns than their respective benchmarks.
  • There is no consistent trend in the yearly active versus index figures, but we have consistently observed underperformance for the majority of Australian active funds in most categories over the longer periods (5-, 10-, and 15-year periods).

SPIVA Australia Mid-Year 2019: Exhibit 1

  • Australian Equity General Funds: The S&P/ASX 200 had a strong rebound in the first half of 2019, however the majority of Australian large-cap equity funds delivered smaller returns than the benchmark. In the 12 months ending June 2019, Australian large-cap equity funds recorded an average return of 6.3%, well below the gain of 11.6% by the S&P/ASX 200. Of the funds in this category, 93.2% and 96.3% failed to outperform the benchmark on absolute and risk-adjusted bases, respectively.
  • Australian Equity Mid- and Small-Cap Funds: The S&P/ASX Mid-Small gained 2.9% in the 12 months ending June 2019, while the Australian mid- and small-cap funds recorded a smaller average return of 1.8%, with 60.5% of funds in this category failing to beat the benchmark on both absolute and relative bases over the same period. Over the 5- and 10-year periods, 75.2% and 46.7% of funds underperformed the S&P/ASX Mid-Small on an absolute basis, respectively.
  • International Equity General Funds: The international equity market also enjoyed a strong rebound in the first half of 2019. In the one-year period ending June 2019, the S&P Developed Ex-Australia LargeMidCap gained 12.1%, while international equity funds marked an average gain of 9.2%, with 72.9% of funds underperforming the benchmark. Over the 5- and 10-year periods, about 82.8% and 92.1% of funds underperformed the S&P Developed Ex-Australia LargeMidCap, respectively.
  • Australian Bond Funds: The S&P/ASX Australian Fixed Interest 0+ Index recorded a gain of 9.5% in the one-year period ending June 2019, while Australian bond funds gained 7.9% and 7.3% on equal- and asset-weighted bases, respectively. On an absolute basis, 84.6% of Australian bond funds underperformed the benchmark, while only 69.2% of funds underperformed on a riskadjusted basis. Over the 10-year period, 72.4% and 60.3% of funds underperformed the S&P/ASX Australian Fixed Interest 0+ Index on absolute and risk-adjusted bases, respectively.
  • Australian Equity A-REIT Funds: The S&P/ASX 200 A-REIT posted a strong one-year return of 19.3% as of June 2019. Within the Australian A-REIT fund category, 71.8% of funds posted a smaller gain than the benchmark, with equal- and asset-weighted average returns of 14.4% and 13.9%, respectively. Over the 5- and 10-year periods, over 80% of funds underperformed the S&P/ASX 200 A-REIT on an absolute basis.
  • Fund Survivorship: In the 12 months ending June 2019, 5.5% of Australian funds from all measured categories were merged or liquidated, with Australian A-REIT funds recording the highest survival rate of 97.2%. In contrast, more than 6% of funds from the Australian Equity General and Australian Equity Mid- and Small-Cap categories disappeared over the same period. Over longer horizons, only 78.5%, 59.6%, and 52.9% of funds across all categories survived the 5-, 10-, and 15- year periods, respectively.
  • Average Fund Returns: Funds in the Australian Equity General and International Equity General categories recorded lower equal-weighted than asset-weighted returns across all measured periods, indicating funds with larger assets tended to perform better than their peers with smaller assets. In contrast, smaller funds in the Australian Equity Mid- and Small-Cap category tended to deliver better performance than those with larger assets.

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