Jan. 18, 2005 — Benchmark indices outperformed actively managed mutual funds in all but one style box in 2004, according to data from Standard & Poor’s Indices Versus Active Funds (SPIVA) Scorecard.

Active funds lagged their respective benchmarks in eight out of nine investment styles for the year, the exception being large-cap growth. S&P stated that the results are in contrast to 2003, where a majority of actively managed funds outperformed indices in five out of nine style boxes; indices outperformed active funds in three; and one category resulted in a tie.

SPIVA’s data for 2004 revealed that the S&P Composite 1500 Index outperformed 51.4% of actively managed domestic equity funds; the S&P 500 outperformed 61.6% of actively managed large-cap funds, the S&P MidCap 400 outperformed 61.8% of actively managed mid-cap funds; and the S&P SmallCap 600 outperformed 85.0% of actively managed small-cap funds.

“In the fourth quarter of 2004, the S&P 500 Index returned 9.23%, representing 85% of the total return for the year (+10.87%),” says Rosanne Pane, mutual fund strategist at Standard & Poor’s. “The impressive rally after the election favored the growth style, and helped large-cap growth funds outperform their index for the year.”

S&P also noted that longer-term results are consistent with past results. Over the past three years, the S&P Composite 1500 has outperformed 59.9% of all domestic equity funds; the S&P 500 outperformed 68.9% of large-cap funds; the S&P MidCap 400 outperformed 79.1% of mid-cap funds; and the S&P SmallCap 600 outperformed 76.8% of small-cap funds.

Similarly, over the past five years, indices outperformed 56.4% of all domestic equity funds, 58.7% of large-cap funds, 84.2% of mid-cap funds, and 72.4% of small-cap funds.

SPIVA’s research also indicated that mergers and liquidations of funds slowed down in 2004. About 5.2% of general equity funds merged or liquidated in 2004, compared to 7.4% in 2003. “In addition, mutual funds were also more style consistent, with 88.8% of funds staying in their investment style in 2004, compared to 72.2% in 2003,” said Srikant Dash, index strategist at Standard & Poor’s.

The complete 2004 SPIVA scorecard is available at www.spiva.standardandpoors.com.

Percentage of Active Funds Outperformed by Relative Benchmark During 2004 and 2003

Fund Category Comparison Index 2004 2003
All Domestic Funds S&P SuperComposite 1500 51.4 47.7
All Large-Cap Funds S&P 500 61.6 64.6
All Mid-Cap Funds S&P MidCap 400 61.8 56.4
All Small-Cap Funds S&P SmallCap 600 85.0 38.8
Large-Cap Growth Funds S&P/BARRA 500 Growth 39.5 44.7
Large-Cap Blend Funds S&P 500 66.9 66.0
Large-Cap Value Funds S&P/BARRA Value 83.3 78.5
Mid-Cap Growth Funds S&P/BARRA MidCap 400 Growth 59.6 31.7
Mid-Cap Blend Funds S&P MidCap 400 51.8 50.0
Mid-Cap Value Funds S&P/BARRA MidCap 400 Value 63.6 81.9
Small-Cap Growth Funds S&P/BARRA 600 SmallCap Growth 93.6 35.3
Small-Cap Blend Funds S&P SmallCap 600 82.9 33.3
Small-Cap Value Funds S&P/BARRA 600 SmallCap Value 77.5 49.3

Source: Standard & Poor’s.

Contact Bob Keane with questions or comments at: bkeane@investmentadvisor.com.