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SPIVA South Africa Mid-Year 2021

SPIVA U.S. Mid-Year 2021

SPIVA Institutional Scorecard Year-End 2020

SPIVA Australia Mid-Year 2021

Australia Persistence Scorecard: Year-End 2020

SPIVA South Africa Mid-Year 2021

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Andrew Innes

Head of EMEA, Global Research & Design

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Andrew Cairns

Director, Global Research & Design

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 six-month and one-, three-, and five-year investment horizons.

MID-YEAR 2021 HIGHLIGHTS

South African Equity

Through the first six months of the year, 60% of South African Equity funds underperformed the S&P South Africa 50.  The same funds fared slightly better in comparison with the S&P South Africa Domestic Shareholder Weighted (DSW) Capped Index; 49% of funds underperformed that benchmark.  A similar, yet less favorable, finding for active funds was evident over longer time horizons, during which the majority underperformed both benchmarks.  Over the five-year period, 93% and 54% underperformed the S&P South Africa 50 and S&P South Africa DSW Capped Index, respectively.

A common argument against comparing active fund performance with that of a passive benchmark is that performance alone cannot tell the whole story and that risk should also be taken into account.  However, Report 1b tells a similar tale; for South African Equity funds, the level of underperformance on a risk-adjusted basis over the five-year period is no better than when comparing returns alone.  Over this period, 93% and 53% of South African Equity funds underperformed the S&P South Africa 50 and S&P South Africa DSW Capped Index, respectively, on a risk-adjusted basis.

The S&P South Africa 50 recorded remarkable returns for the six-month and one-year periods, gaining 13.7% and 27.8%, respectively.  On an asset-weighted basis, South African Equity funds fared well in comparison to this benchmark, outperforming by 0.79% and 1.17% over the six-month and one-year periods, respectively.  However, this recent outperformance was not representative of the longer-term three- and five-year periods, when South African Equity funds underperformed by an annualized figure of 3.11% and 4.33%, respectively.

Global Equity

During the first six months of the year, 64% of Global Equity funds were outperformed by the S&P Global 1200, this figure rose to 89% over the three- and five-year periods.  On a risk-adjusted basis, this impressive outperformance continued, with 91% of funds failing to beat the S&P Global 1200 for the three- and five-year periods.

On an asset-weighted basis, there was little to separate Global Equity fund returns from their benchmark for the one-year period; fund returns were higher by 0.22%.  The benchmark outperformed by an annualized 2.92% and 1.72% over the three- and five-year periods, respectively.  Further highlighting the S&P Global 1200’s dominance over the long term, even the 75th percentile of Global Equity funds failed to outperform the benchmark for the three- and five-year periods.

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SPIVA U.S. Mid-Year 2021

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Gaurav Sinha

Managing Director, Head of Americas Global Research & Design

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Berlinda Liu

Director, Global Research & Design

SUMMARY

Following an initial steep drop and recovery at the onset of the COVID-19 pandemic, equity markets around the world continued their rebound in 2021 as the global economy began to re-open.  The S&P 500® had recovered all of its COVID-19-related losses by August 2020, and it posted a 40.8% gain over the 12 months ending on June 30, 2021.  Of the 31 distinct benchmarks tracked by this report, 27 finished with a positive return over the year; the exceptions were among longer-term fixed income indices.

The positive market performance broadly translated into good absolute returns for active fund managers.  But relative returns continued to disappoint; in 15 out of 18 categories of domestic equity funds, the majority of actively managed funds underperformed their benchmarks.  The performance was particularly underwhelming in the small-cap space, as 78% of all small-cap funds lagged the S&P SmallCap 600®.

Percent of Domestic Equity Funds Underperforming Benchmarks in Trailing One-Year Period

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SPIVA Institutional Scorecard Year-End 2020

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Gaurav Sinha

Managing Director, Head of Americas Global Research & Design

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Berlinda Liu

Director, Global Research & Design

SUMMARY

In this report, we add institutional accounts to the mutual funds analyzed in the S&P Indices Versus Active (SPIVA®) U.S. Scorecard. We aim to provide the institutional community with the ability to judge managers' true skills without the possible distortions that fees may create on performance comparisons. We also examine the impact of fees on both account types. By comparing retail mutual funds and institutional accounts on a gross-of-fees basis against their respective benchmarks, we eliminate the possibility that fees are the sole contributor to a given manager's underperformance.

Overall, underperformance among institutional equity accounts was not meaningfully different from that reported for mutual funds.  For example, 78% of large-cap institutional accounts and 77% of large-cap mutual fund managers underperformed the S&P 500® on a gross-of-fees basis over the past 10 years.  Net-of-fees, of course, results were even worse, with an additional 5% of large-cap institutional and mutual fund managers underperforming the benchmark (see Exhibit 1).

Exhibit 1

Institutional accounts had a better chance than their mutual fund counterparts of outperforming their benchmarks (gross-of-fees) in 12 of the 17 domestic equity fund categories tracked. Nonetheless, the majority of institutional accounts across all equity fund categories underperformed over the 10-year period, ranging from a high of 85% of multi-cap core funds to a low of 50% of mid-cap growth funds (see Report 1).

The volatility in financial markets in 2020 provided ample opportunity for fund managers to show their stock-picking skills. Growth managers in particular were well positioned to benefit from the accelerated lifestyle changes as a result of the pandemic. A stellar 86% of small-cap growth and mid-cap growth institutional funds were able to beat the S&P MidCap 400® Growth and S&P SmallCap 600® Growth, respectively, in 2021. A less impressive 53% of large-cap growth funds beat the S&P 500 Growth. However, the longer-term statistics remained sobering, as just 23%, 50%, and 43% of large-, mid-, and small-cap growth funds, respectively, were able to stay ahead of their benchmarks for the 10-year horizon. This might be explained by the remarkable outperformance of the S&P 500 Growth (33.5%) over the S&P MidCap 400 Growth (22.8%) and the S&P SmallCap 600 Growth (19.6%) in 2020. Tilting toward larger-cap stocks no longer helped these active funds when the performance gap narrowed over longer time periods (see Report 1).

The story was broadly similar for value fund managers. Although value indices continued to trail growth indices as they did for much of the previous decade, value managers joined the 2020 outperformance party: 71%, 54%, and 66% of large-cap, mid-cap, and small-cap value funds beat their benchmarks, respectively. The 10-year tale was somewhat less celebratory, as just 38%, 39%, and 29% managed the feat over the longer period (see Report 1).

International funds were a notable exception to 2020's equity exuberance. In all four categories across all four time periods analyzed, the majority of funds fell short of their benchmarks (see Report 6).

Fixed income results were mixed, as a majority of funds in 8 of the 17 categories underperformed their benchmarks over the 1- and 10-year horizons (see Report 11).

As a fourth round of quantitative easing took place in the U.S., lower interest rates and a rush to the suburbs soon followed, buoying home prices (and prompting refinancings). MBS funds took full advantage, as 75% beat the Bloomberg Barclays U.S. MBS Index in 2020, the best of any fixed income category. A respectable 62% also did so over the previous 10 years (see Report 11).

Government funds did not come along for the fixed income ride. While the Bloomberg Barclays U.S. Government Index posted a healthy 7.94% return in 2020, actively managed government funds only squeezed out a 6.69% return on an equal-weighted basis and 5.71% on an asset-weighted basis. This led to a worst-in-class 24% of active managers that managed to surpass their benchmarks in 2020, while a woeful 11% did so over the previous 10 years (see Reports 11, 13, and 14).

Among mutual funds, active international equity managers showed greater differences between the gross- and net-of-fees relative performance figures than did their domestic fund peers. No such notable difference between categories was observed among institutional accounts (see Exhibits 2 and 3).

For fixed income funds, relative performance chances suffered the greatest impact from fees in the emerging markets debt space. While 37% of institutional emerging markets hard currency funds failed to clear the benchmark over the past 10 years, gross-of-fees, 100% failed to do so net-of-fees (see Exhibit 5).

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SPIVA Australia Mid-Year 2021

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Tim Wang

Senior Analyst, Global Research & Design

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Priscilla Luk

Managing Director, Global Research & Design, APAC

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 past 19 years, we have built on our experience publishing the report by expanding scorecard coverage into Australia, Canada, Europe, India, Japan, Latin America, South Africa, and the MENA region.
  • The SPIVA Australia Scorecard reports on the performance of Australian active funds against their respective benchmark indices over different time periods. In this scorecard, we evaluated the returns of 936 Australian equity funds (large, mid, and small cap, as well as A-REIT), 500 international equity funds, and 109 Australian bond funds.
  • More than one-half of the funds in the Australian Equity General and Australian Equity Mid/Small-Cap categories beat their respective benchmarks in the first half of 2021, while 68.9% of those in the International Equity General category underperformed the benchmark.
  • For longer measured periods (3, 5, 10, and 15 years), the majority of active funds underperformed their respective benchmark indices across categories, except for Australian Equity Mid- and Small-Cap funds.
SPIVA Australia Mid-Year 2021 Exhibit 1 Chart

  • Australian Equity General Funds: The S&P/ASX 200 gained8% in the 1-year period ending June 30, 2021, while Australian Equity General funds recorded higher returns of 29.2% and 30.1% on equal- and asset-weighted bases, respectively. During this period, 55.7% of funds in this category outperformed the benchmark.  But over the 5- and 10-year horizons, 75.7% and 80.8% of funds failed to beat the benchmark, respectively.
  • Australian Equity Mid- and Small-Cap Funds: The S&P/ASX Mid-Small posted a strong gain of 34.5% in the 1-year period ending June 30, 2021, and 65% of Australian Equity Mid- and Small-Cap funds beat the index. Funds in this category gained 41.0% and 39.9% on equal- and asset-weighted bases, respectively, for the same period.  Over the 5- and 10-year periods, 65.3% and 55.1% of funds underperformed the benchmark, respectively.
  • International Equity General Funds: International equity funds returned 28.5% and 24.5% on equal- and asset-weighted bases, respectively, in the 1-year period ending June 30, 2021, with 54.6% of funds failing to beat the benchmark. Over the 5- and 10-year periods, more than 80% and 90% 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 loss of 0.87% in the 1-year period ending June 30, 2021, while funds in the Australian Bonds category recorded minor gains of 0.06% and 0.35% on equal- and asset-weighted bases, respectively. Over 70% of funds in this category beat the benchmark during this period.  In contrast, 70.2% and 85.5% of funds underperformed the benchmark over the 5- and 10-year periods, respectively.
  • Australian Equity A-REIT Funds: In the 1-year period ending June 30, 2021, Australian Equity A-REIT funds posted gains of 32.6% and 32.8% on equal- and asset-weighted bases, respectively, and 58.5% of them lagged the benchmark. Over the 5- and 10-year periods, 56.5% and 78.8% of funds in this category underperformed the benchmark, respectively.
  • Fund Survivorship: Liquidation rates for some active fund categories were high in the 1-year period ending June 30, 2021. Of all Australian funds measured, 7.7% were merged or liquidated, with those in the Australian Equity General category recording the highest liquidation rate, at 10.7%.  In contrast, only 2.9% of Australian Equity Mid- and Small-Cap funds failed to survive.  Over longer horizons, only 84.0%, 76.5%, and 60.6% of funds across all categories survived the 3-, 5-, and 10-year periods, respectively.

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Australia Persistence Scorecard: Year-End 2020

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Tim Wang

Senior Analyst, Global Research & Design

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Priscilla Luk

Managing Director, Global Research & Design, APAC

EXECUTIVE SUMMARY

  • While comparing active funds against their respective benchmark indices is a typical practice to evaluate their performance, persistence is an additional test that can reveal fund managers’ skills in different market environments.
  • In this report, we measure the performance persistence of active funds that outperformed their peers and benchmarks over consecutive three- and five-year periods, and we analyze their transition matrices over subsequent periods.
  • Overall results suggested only a minority of Australian high-performing funds persisted in outperforming their respective benchmarks or consistently stayed in their respective top quartiles for three or five consecutive years.

  • Over a consecutive three-year period, 27.5% of funds consistently maintained top-quartile rankings and 38.8% of funds consistently beat their benchmark.
  • Over a consecutive five-year period, only 1.0% of funds consistently maintained top-quartile rankings and 2.2% of funds consistently beat their benchmark.
  • Top-quartile and outperforming Australian funds did not show strong persistence over two non-overlapping three- and five-year periods, though they recorded lower liquidation rates.
  • Only 36.6% of funds maintained top-quartile rankings over two successive three-year periods and fewer (26.9%) did so for two successive five-year periods.
  • Among Australian funds that outperformed their benchmarks, 47.1% consistently beat their benchmarks consecutively over the three-year period and only 26.5% of them did so for the five-year period.

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