Along with Tilney Bestinvest’s ‘Dog Fund’ report, the bi-annual S&P Indices Versus Active Funds (SPIVA) report usually makes for uncomfortable reading by active fund managers.
Today’s release of the European report is no different. For the period ending December 31, 2021, the scorecard shows that for Swiss Equity Funds over half (55 percent) of actively managed funds underperformed the S&P Switzerland BMI. Over the 10-year period, 74 percent underperformed the benchmark.
Active funds investing in Swiss equity achieved an asset-weighted return of 0.1 percent below the S&P Switzerland BMI over one year and 0.4 percent above the benchmark over ten years. The average asset-weighted return indicates the performance of an average investor and mitigates the influence of smaller funds.
Turning to another major financial hub, the UK, the numbers aren’t exactly awe inspiring either. Over the one-year period, 55.5 percent of UK Equity funds underperformed the S&P United Kingdom BMI.
Large- and mid-cap fund managers fared worse on a risk-adjusted basis; over 85 percent of both UK Equity and UK Large-/Mid-Cap Equity funds were worse off than the benchmark over the one-year period.
However, UK Small-Cap Equity funds continued their trend of outperforming the benchmark in large numbers; 75.6 percent outperformed over the one-year period. Predictably, this number fell to 42.4 percent over the 10-year time horizon.
In more general terms, of active euro-denominated Europe Equity funds, 74.8 percent underperformed the S&P Europe 350 in 2021. On a risk-adjusted basis the same group of funds generally fared no better, with 79.7 percent and 84.3 percent underperforming over the 1- and 10-year period respectively.
One of the reasons for these results is the recovery in many of Europe’s markets as illustrated by European regional benchmarks seeing double-digit returns across the board, with many returning over 20 percent for the one-year period. While many fund managers also enjoyed double-digit returns, the buoyant markets meant it was always going to be a challenge to beat their benchmarks in these conditions.
Andrew Innes, EMEA head of global research and design at S&P Dow Jones Indices, said in a statement: “In spite of the ongoing COVID-19 pandemic throughout 2021, European equity markets recovered well from the extreme volatility of the previous year. Fewer European fund managers beat the benchmark than in the prior year as presumably fund managers in this region may have utilised their skills better during more volatile market conditions than in a comparatively stable environment.”
Due to how the SPIVA is constructed, short term successes of fund managers often dissipates as the time horizon is increased.
