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Most Large-Cap Funds Outpace Index in First Quarter

By Staff Writer

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April 16, 2004 – Actively managed large-cap funds outpaced the S&P 500 in the first quarter of 2004, while most mid-cap and small-cap managers could not beat their benchmarks.

Standard & Poor’s Indices Versus Active Funds Scorecard (SPIVA) revealed that 55% of large-cap managers outpaced the S&P 500 Index during the first quarter. Meanwhile, the S&P MidCap 400 index outperformed 62.2% of mid-cap funds, while the S&P SmallCap 600 index outpaced 67.6% of small-cap funds.

Over the past twelve months, growth managers have outperformed their index benchmarks across large-, mid- and small-cap categories. “Growth managers have benefited from the aggressive recovery in the stock market,” noted Rosanne Pane, Mutual Fund Strategist at Standard & Poor’s. “Over the past 12 months, 74.0% of large cap growth funds, 57.7% of mid-cap growth funds and 58.4% of small-cap growth funds have outperformed their index benchmarks.”

Over longer-time periods, indices continue to outperform. Over the last five years, the S&P 500 outperformed 52.3% of large-cap funds, the S&P MidCap 400 outperformed 86.2% of mid-cap funds, and the S&P SmallCap 600 outperformed 72.7% of small-cap funds.

Over the last three years, the S&P 500 outperformed 65.5% of large-cap funds, the S&P MidCap 400 outperformed 84.5% of mid-cap funds and the S&P SmallCap 600 outperformed 71.1% of small-cap funds.

Beginning with this quarter, SPIVA reports will also include performance of index funds versus comparable active blend managers on both an equal- and asset-weighted basis. Over the past five years on an equal-weighted basis, 50.3% of active large-cap blend funds outperformed S&P 500 index funds. S&P MidCap 400 index funds outperformed 78.1% of active mid-cap blend funds, and S&P SmallCap 600 index funds outperformed 60.0% of actively managed small-cap blend funds.

“Among index funds, five-year asset-weighted average returns are greater than equal weighted returns,” notes Srikant Dash, Index Strategist at Standard & Poor’s. “This suggests that index funds with greater asset sizes have performed better by benefiting from economies of scale.”

The SPIVA report also found that on an asset-weighted basis, the average expense ratio for S&P 500 index funds is 0.154%, S&P MidCap 400 index funds is 0.319%, and S&P SmallCap 600 index funds is 0.298%. “Keeping track of expense ratios is as important for index funds as for active funds as there can be a wide discrepancy among funds,” added Dash.

The complete first quarter SPIVA scorecard and previous quarterly SPIVA reports are available at: www.spiva.standardandpoors.com.