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 Financial Happenings Blog 
Tuesday, March 06 2012

The latest SPIVA Scorecard (Standard & Poors Indices Versus Active funds) has been released and even though there has been some slight improvement for active fund managers since the last report, the overall news remains bleak.

The key findings were:

·   The S&P/ASX 200 Accumulation Index has outperformed at least 60% of active Australian equity funds over the periods of one year or more. The S&P/ASX 200 Accumulation Index has outperformed approximately 63% of active Australian Equity General funds over the last five years.

·   Active Australian Equity Small-Cap funds have significantly outperformed the benchmark across all periods studied in this report. Over the last five years approximately 80% of active Australian Equity Small-Cap funds have outperformed the S&P/ASX Small Ordinaries Index, with this majority increasing to 90% over the last year. Both the equal- and asset-weighted average returns of the active fund category have far outperformed the S&P/ASX Small Ordinaries Index across all periods studied.

·   With the exception of active Australian Equity Small-Cap funds, a majority of funds across all categories have failed to beat their respective indices over all periods observed in this report. Over the last year at least two-thirds of active funds across most categories failed to beat their respective indices. Australian Equity Small-Cap funds are the only exception to this finding.

·   At least 80% of active International Equity General funds underperformed relative to the benchmark over the last year. Over both three- and five-year periods, at least 62% of International Equities General funds have failed to beat the index.

·   Over the last five years approximately 84% of active Australian Bond funds have failed to beat the index. However, over three years the underperforming percentage falls to approximately 62%.

·   Approximately 57% of active Australian A-REIT funds have failed to beat the benchmark over the last five years, increasing to an even larger majority of 74% when taking into account only the last year. Over both three- and five-year periods, active Australian Equity A-REIT funds enjoyed the highest survivorship rate when compared to the other active categories covered in the SPIVA Australia Scorecard.


The only bright spot to mention for active managers is in relation to small caps.  A major reason for the out-performance is that many small cap managers will dig a lot deeper than the S&P index which stops at the 500th largest company on the ASX. The manager we use for small caps uses an index style approach but invests in much smaller companies than just those in the ASX500.  This fund has also significantly out-performed the S&P index by 2.11% through 2011, 3.47% p.a.over 3 years and 4.79% p.a. over 5 years.

Concluding Comments

This research again backs up our firm’s approach to build a portfolio around index style funds which promise lower fees and better than average performance compared to their actively managed counterparts.

Click on the following link for a copy of the full SPIVA report.

Regards,

Scott

Posted by: Scott Keefer AT 09:11 am   |  Permalink   |  Email
 
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