Last year was tough for the equity market thanks to falling oil prices, a strengthening U.S. dollar and other factors. The S&P 500 had a total return of nearly 1.4% in 2015 vs. 1.0% for the S&P Composite 1500.
But how did the active mutual funds fare? That’s what the S&P Dow Jones Indices’ research looks at every six months, when it posts its S&P Indexes Versus Active Research, or SPIVA, U.S. Scorecard.
Last year, for instance, 66.1% of large-cap managers, 56.8% of mid-cap managers and 72.2% of small-cap managers underperformed the S&P 500, the S&P MidCap 400 and the S&P SmallCap 600, respectively, according to S&P’s latest research.
“The figures are equally unfavorable when viewed over longer-term investment horizons,” stated Aye M. Soe, senior director of global research and design for S&P in the study. Over the five-year period, some 84.2% of large-cap managers, 76.7% of mid-cap managers, and 90.1% of small-cap managers performed failed to keep up with their respective benchmarks.
Over the 10-year investment horizon, the results were similar: 82.1% of large-cap managers, 87.6% of mid-cap managers, and 88.4% of small-cap managers were unable to outperform their passive benchmarks on a relative basis.
S&P’s latest study also reveals the funds “disappear at a meaningful rate.” Nearly 23% of domestic equity funds, 22% of global/international equity funds and 17% of fixed income funds were merged or liquidated over the past five years. This finding, the group says, highlights the importance “of addressing survivorship bias in mutual fund analysis.”