In the first half of 2015, the markets fluctuated modestly. According to S&P Dow Jones Indices, though, this was a tough period for fund managers.
The group’s data, known as the SPIVA (for S&P indices vs. active research) U.S. Scorecard, 65.3% of large-cap managers underperformed the benchmark, which rose 7.4% from July 2014 to July 2015. Plus, S&P says, over the five- and 10-year periods, 80.8% and 79.6% of large-cap managers, respectively, “failed to deliver incremental returns over the benchmark.”
As for mid-cap managers: “The investment landscape improved modestly,” said Aye Soe, CFA and senior director of index research & design, in S&Ps mid-year ‘15 report. About 48.1 % were unable to top the S&P MidCap 400 over the one-year period ending June 30.
In the small-cap sector, 58.5% of active small-cap funds lagged the benchmark. Plus, over the past five- and 10-year periods, the vast majority of actively managed mid- and small-cap funds underperformed their respective benchmarks, Soe explains.
“It is commonly believed that active management works best in inefficient markets, such as small-cap or emerging markets. This argument is disputed by the findings of this SPIVA report,” she wrote. “The majority of small-cap active managers consistently underperformed the benchmark in both the 10-year period and each rolling five-year period since 2002.”
Market conditions favored growth-style investing in the past 12 months, according to S&P, when growth indices across market cap ranges returned higher than value indices. Plus, during this period, the majority of active large, mid- and small-cap growth funds outperformed their benchmarks.
Equity indices tracking international and emerging markets bounced back in the second half of 2015, though the gains were not sufficient; the groups posted negative returns for the past 12 months. With the exception of emerging market equity funds, though, funds invested in global, international, and international small-cap equity categories “fared better or at par with their respective benchmarks,” Soe states.