SPIVA U.S. Year-End 2020 Scorecard

[Pages:37]Research

SPIVA? U.S. Scorecard

Contributors

Berlinda Liu, CFA Di rec to r Global Research & Design berl i n d a.l i u@s p glo bal .co m Gaurav Sinha Managing Director Global Research & Design g aurav .s i n h a@s p glo bal .co m

Experience the active vs. passive debate on a global scale.

% of Active FundsUnderperforming Benchmark

40.7 42.3 43.3

48.0 48.3 48.9

51.4 54.9 57.1 58.3 60.5 63.4 64.9 64.9 68.0 68.8 70.0 74.0 84.7 86.9

SUMMARY

The year 2020 was tumultuous for financial markets. The COVID-19 pandemic threw the world into chaos early in the year, with the S&P 500? falling 33.8% between Feb. 19, 2020, and March 23, 2020. Governments and central banks pulled out their playbooks from the global financial crisis of a decade earlier and acted swiftly to increase spending and ease monetary policy. Financial markets rapidly recovered, with the S&P 500 regaining its all-time high by August and ending the year up 18.4% after shrugging off U.S. election histrionics.

The torrent of liquidity depressed interest rates and pushed up asset prices nearly everywhere investors looked. Of the 31 distinct benchmarks tracked by this report, 30 finished with a positive return for 2020; the S&P United States REIT (-7.5%) was the only exception.

The positive market performance broadly translated into good absolute returns for active fund managers. While the turmoil and disruption caused by the pandemic should have offered numerous opportunities for outperformance, 57% of domestic equity funds lagged the S&P Composite 1500? during the one-year period ending Dec. 31, 2020 (see Report 1).

Exhibit 1: Percentage of Domestic Equity Funds Underperforming the S&P Composite 1500

100

90

80

70

60

50

40

30

20

10

0

2009 2005 2013 2003 2010 2007 2004 2001 2020 2002 2016 2017 2008 2012 2006 2018 2019 2015 2011 2014

Source: S&P Dow Jones Indices LLC. Data as of Dec. 31, 2020. Past performance is no guarantee of future results. Chart is provided for illustrative purposes.

Register to receive our latest research, education, and commentary at on.SignUp.

SPIVA U.S. Scorecard

Year-End 2020

Large-cap funds picked up where they left off the previous decade--for the 11th consecutive one-year period, the majority (60%) underperformed the S&P 500. Mid-cap (51%) and small-cap (46%) funds did somewhat better relative to the S&P MidCap 400? and S&P SmallCap 600?, respectively (see Report 1).

The ongoing growth versus value battle firmly tilted toward growth in 2020. The pandemic boosted the f ortunes of those positioned to take advantage of changing lif estyles, with the S&P 500 Growth returning 33.5%, while the S&P 500 Value managed a meager 1.4%. A healthy 62% of large-cap growth funds, 83% of mid-cap growth funds, and 86% of small-cap growth funds topped the S&P 500 Growth, S&P MidCap 400 Growth, and S&P SmallCap 600 Growth, respectively. However, this did little to improve their longer-term relative performance, as on a 20-year horizon a paltry 4%, 10%, and 6% of large-, mid-, and small-cap growth funds beat their benchmarks, respectively (see Report 1).

Active value funds posted more mixed results. While 67% of large-cap value funds beat the S&P 500 Value, just 47% of mid-cap value funds and 56% of small-cap value funds were able to do so. Nevertheless, 20-year results showed a similar decline to growth funds, as just 23%, 15%, and 24% of large-, mid-, and small-cap value funds outperformed their benchmarks, respectively (see Report 1).

For U.S. funds looking outside of the country, relative results in 2020 were a toss -up. Roughly 50% of global, international, international small-cap, and emerging markets funds beat the S&P Global 1200, S&P International 700, S&P Developed Ex-U.S. SmallCap, and S&P/IFCI Composite, respectively. This clustering artifact remained, but the poor results widened when viewed over three years (about 60% underperforming), f ive years (about 70%), or 20 years (about 90%) (see Report 6).

Gorging on central bank largesse, the long-tenor bonds of the Bloomberg Barclays US Government Long returned a spectacular 17.6% for the year. The government long funds charged with targeting this index failed in spectacular fashion, as fewer than 6% were able to clear this hurdle. In 3 of the 14 fixed income categories tracked (government long funds, investment -grade long funds, and loan participation funds), more than 90% of funds failed to clear their benchmarks in 2020. Better results were generally found in the intermediate and shorter-dated tenors for 2020 (see Report 11).

Echoing the results from equities, longer observation horizons offered little sanctuary. More than 60% of funds underperformed their benchmarks across all fixed income categories over the 15-year horizon; in 10 of the 14 categories tracked, more than 80% of funds came up short (see Report 11).

The SPIVA Scorecard's accounting for survivorship bias continues to be a valuable cautionary tale . As has generally been the case in recent years, roughly 5%-10% of funds across asset classes and categories were merged or liquidated in 2020. Over 20 years, nearly 70% of domestic equity funds and two-thirds of internationally focused equity funds across segments were confined to the history books (see Reports 2 and 7).

RESEARCH | SPIVA

2

SPIVA U.S. Scorecard

Year-End 2020

A UNIQUE SCORECARD FOR T HE ACTIVE VERSUS PASSIVE DEBATE

There is nothing novel about the index versus active debate. It has been a contentious subject for decades, and there are a f ew strong believers on both sides, with the vast majority of market participants falling somewhere in between. Since its first publication in 2002, the SPIVA Scorecard has served as the de facto scorekeeper of the active versus passive debate. When headline numbers have deviated from their beliefs, we have heard passionate arguments from both camps.

Beyond the SPIVA Scorecard's widely cited headline numbers is a rich data set that addresses issues -- often far more fascinating though far less discussed--about measurement techniques, universe composition, and fund survivorship. These data sets are rooted in the following fundamental principles of the SPIVA Scorecard, with which regular readers will be familiar.

? Survivorship Bias Correction: Many funds might be liquidated or merged during a period of study. However, for someone making an investment decision at the beginning of the period, these funds are part of the opportunity set. Unlike other commonly available comparison reports, SPIVA Scorecards account for the entire opportunity set--not just the survivors--thereby eliminating survivorship bias.

? Apples-to-Apples Comparison: Fund returns are often compared to popular benchmarks such as the S&P 500, regardless of size or style classification. SPIVA Scorecards avoid this pitfall by measuring a fund's returns against the returns of a benchmark appropriate for that particular investment category.

? Asset-Weighted Returns: Average returns f or a f und group are of ten calculated using only equal weighting, which results in the returns of a USD 10 billion fund affecting the average in the same manner as the returns of a USD 10 million fund. A more accurate representation of how market participants fared in a particular period is found by calculating weighted average returns where each fund's return is weighted by net assets. SPIVA Scorecards show both equal- and assetweighted averages.

? Style Consistency: SPIVA Scorecards measure style consistency for each style category across different time horizons. Style consistency is an important metric because style drift (the tendency of funds to diverge from their initial investment categorization) can have an impact on asset allocation decisions.

? Data Cleaning: SPIVA Scorecards avoid double counting multiple share classes in all count -based calculations, using only the share class with greater assets. Since this is meant to be a scorecard for active managers, it excludes index funds, leveraged and inverse funds, and other index-linked products.

RESEARCH | SPIVA

3

SPIVA U.S. Scorecard

Year-End 2020

HISTORICAL VIEW

To provide context for the relative performance of active funds, we compile annual league tables (see Exhibits 2a, 2b, and 2c) across the U.S. equity, international equity, and fixed income categories. The tables show how active funds performed against their benchmarks in each calendar year.

We also provide the three-year relative performance of managers across major domestic and international equity categories (see Exhibits 3, 4, and 5). The figures are calculated on a rolling semiannual basis.

Exhibit 2a: Percentage of U.S. Equity Funds Underperforming Benchmarks Each Year

FUND CATEGORY

All Domestic Funds All Large-Cap Funds All Mid-Cap Funds

COMPARISON INDEX S&P Composite 1500

S&P 500

S&P MidCap 400

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 68.0 48.9 64.9 40.7 48.3 84.6 64.9 43.3 86.9 74.0 60.5 63.4 68.8 70.0 57.1 68.4 44.6 56.0 48.4 65.9 82.2 62.7 54.6 86.7 65.4 66.0 63.1 64.5 71.0 60.3 44.8 45.8 75.7 55.7 73.3 68.6 79.8 37.1 66.1 57.2 89.4 44.4 45.6 31.7 50.7

All Small-Cap Funds S&P SmallCap 600 62.5 46.0 83.3 30.7 54.0 85.8 66.3 67.8 72.0 71.8 85.5 47.7 68.5 38.5 45.5

All Multi-Cap Funds

Large-Cap Growth Funds Large-Cap Core Funds Large-Cap Value Funds

Mid-Cap Growth Funds Mid-Cap Core Funds Mid-Cap Value Funds Small-Cap Growth Funds Small-Cap Core Funds Small-Cap Value Funds Multi-Cap Growth Funds Multi-Cap Core Funds

S&P Composite 1500

S&P 500 Growth

S&P 500

S&P 500 Value

S&P MidCap 400 Growth

S&P MidCap 400

S&P MidCap 400 Value S&P SmallCap 600 Growth

S&P SmallCap 600

S&P SmallCap 600 Value S&P Composite 1500 Growth S&P Composite 1500

68.8 46.0 70.1 39.3 60.4 83.9 65.2 46.8 81.6 70.1 74.9 56.5 66.8 69.2 55.6 93.9 27.1 90.7 36.8 51.0 95.9 45.6 41.1 95.6 47.6 89.8 32.9 60.3 33.3 38.2 81.1 43.5 52.3 50.5 76.6 83.2 66.6 57.7 80.4 73.7 74.6 69.0 75.8 69.5 65.9 80.3 45.8 24.5 45.7 70.6 54.3 85.0 64.9 77.8 61.5 78.0 46.9 46.3 97.2 33.4 28.0 42.0 91.0 54.0 84.1 76.5 86.8 34.5 55.4 79.7 94.6 18.0 15.2 9.3 17.2 32.0 60.8 60.2 70.7 86.5 65.7 78.6 43.0 58.6 68.2 90.6 61.7 62.2 40.5 80.4 36.9 57.8 68.0 47.3 57.1 67.6 73.5 40.8 71.4 34.4 96.8 43.1 72.2 65.0 52.7 50.8 40.8 94.8 31.3 62.2 94.1 62.9 55.3 64.0 87.5 96.0 15.1 61.5 13.8 13.7 56.3 55.5 82.1 33.2 58.6 86.0 68.7 77.7 66.9 77.5 89.5 58.6 87.5 41.4 62.4 71.3 39.4 72.1 25.2 42.0 81.8 61.5 78.8 94.1 45.0 88.9 74.1 83.3 80.0 43.8 73.2 29.8 88.3 42.0 45.7 94.8 51.6 38.8 87.4 65.5 85.3 46.3 65.9 45.2 46.7 77.4 45.2 65.8 39.2 66.1 82.9 68.2 53.3 84.1 83.9 74.5 68.8 81.7 74.4 62.1

Multi-Cap Value Funds

S&P Composite 1500 Value

84.0 58.1 48.4 35.8 68.2 66.7 72.6 47.9 67.3 55.6 71.2 49.6 74.8 91.8 50.0

Real Estate Funds

S&P United States REIT

68.4 45.3 72.9 38.3 66.7 66.3 62.0 64.8 67.8 43.0 84.0 36.9 88.9 26.6 24.7

Source: S&P Dow Jones Indices LLC. Data as of Dec. 31, 2020. Past performance is no guarantee of future results. Table is provided for

illustrative purposes.

Exhibit 2b: Percentage of International Equity Funds Underperforming Benchmarks Each Year

FUND CATEGORY Global Funds

COMPARISON INDEX

S&P Global 1200

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 75.3 54.2 61.6 52.3 43.8 71.8 61.8 47.5 76.5 58.2 79.7 50.2 70.6 57.1 54.3

International Funds S&P 700

74.7 68.2 64.3 71.5 40.2 69.5 44.3 43.2 68.2 25.5 84.9 54.0 76.8 57.3 54.6

International Small Cap Funds

S&P Developed Ex? U.S. SmallCap

64.6 36.5 53.1 49.2 45.3 60.0 24.6 47.9 69.0 48.9 71.8 44.0 90.8 60.5 51.9

Emerging Markets Funds

S&P/IFCI Composite

77.6 69.9 65.3 71.2 64.9 52.6 45.6 55.0 70.7 66.0 63.9 64.9 61.9 36.1 52.0

Source: S&P Dow Jones Indices LLC. Data as of Dec. 31, 2020. Past performance is no guarantee of future results. Table is provided for

illustrative purposes.

RESEARCH | SPIVA

4

SPIVA U.S. Scorecard

Year-End 2020

Exhibit 2c: Percentage of Fixed Income Funds Underperforming Benchmarks Each Year

FUND CATEGORY

COMPARISON INDEX

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Government Long Funds

Barclays US Government Long

20.0 89.4 95.7 8.3 95.3 96.6 71.4 10.9 96.8 20.3 87.9 96.4 17.0 98.0 94.3

Government Intermediate Funds

Barclays US Government Intermediate

57.6 92.6 90.0 9.1 73.8 60.5 33.3 76.7 44.4 88.9 74.1 57.9 100.0 68.8 53.6

Government Short Funds

Barclays US Government (1-3 Year)

71.4 90.7 86.0 23.8 59.5 61.0 42.5 95.1 60.0 89.7 63.2 47.8 87.0 73.1 47.8

Investment-Grade Long Funds

Barclays US Government/Credit Long

9.2 84.3 95.2 7.4 78.0 99.3 62.0 7.3 98.0 12.1 75.0 96.7 9.1 95.3 94.4

Investment-Grade Intermediate Funds

Barclays US Government/Credit Intermediate

49.1 93.0 89.9 14.1 31.4 49.6 20.7 63.5 33.1 93.2 19.8 31.4 90.8 32.2 33.5

Investment-Grade Short Funds

Barclays US Government/Credit (1-3 Year)

46.9 96.3 98.8 16.7 25.0 56.6 11.1 52.6 50.0 70.9 26.6 22.2 92.6 37.1 44.0

Barclays US

High Yield Funds

Corporate High Yield

83.9 44.2 39.2 90.7 75.3 80.0 72.9 68.3 74.1 34.7 94.2 81.0 75.6 64.8 77.7

Mortgage-Backed Securities Funds

Barclays US Aggregate Securitized - MBS

92.9 87.5 94.3 36.5 25.0 53.1 24.6 71.2 75.8 72.9 60.0 67.9 84.6 70.8 52.1

Global Income Funds

Barclays Global Aggregate

69.2 69.4 77.0 30.0 39.6 77.7 18.5 48.9 37.8 61.5 33.1 64.9 61.0 38.8 69.1

Emerging Markets Debt Funds

Barclays Emerging Markets

30.0 42.9 65.4 48.3 34.5 91.4 50.8 74.0 77.8 89.3 39.2 22.6 93.0 49.1 64.4

General Municipal Debt Funds

S&P National AMT-

Free Municipal

73.1 84.1 81.5 25.0 57.3 77.2 20.8 68.7 31.3 59.3 71.9 42.9 85.3 40.3 59.7

Bond

California Municipal Debt Funds

S&P California AMT-Free Municipal Bond

72.1 95.2 94.9 10.5 77.8 75.0 6.1 91.4 13.9 38.9 61.1 25.7 93.9 32.4 68.6

New York Municipal Debt Funds

S&P New York AMT-Free Municipal Bond

76.3 91.2 88.2 27.3 58.1 75.0 17.2 100.0 7.1 53.6 74.1 33.3 76.0 26.9 57.1

Loan Participation Funds

S&P/LSTA U.S. Leveraged Loan 100

-

-

-

- 55.0 14.8 77.5 36.8 56.9 13.5 81.8 52.1 56.9 100.0 90.6

Source: S&P Dow Jones Indices LLC. Data as of Dec. 31, 2020. Past performance is no guarantee of future results. Table is provided for

illustrative purposes.

RESEARCH | SPIVA

5

6

RESEARCH | SPIVA

Source: S&P Dow Jones Indices LLC. Data as of Dec. 31, 2020. Past performance is no guarantee of future results. Charts are provided for illustrative purposes.

0

25

50

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

0

25

50

75

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

75

25

0

U.S. Real Estate Funds 100

25

0 All Multi-Cap Funds

100

50

50

75

75

0

All Small-Cap Funds 100

0

All Mid-Cap Funds 100

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

25

25

50

50

75

75

All Large-Cap Funds 100

All Domestic Funds 100

Exhibit 3: Percentage of U.S. Equity Funds Underperforming Benchmarks (Rolling Three-Year Returns)

Year-End 2020

SPIVA U.S. Scorecard

SPIVA U.S. Scorecard

Year-End 2020

Exhibit 4: Percentage of U.S. Equity Funds Underperforming Benchmarks (Rolling Three-Year Returns)

Large-Cap Funds 100

75

As of Dec. 31, 2020:

50

Growth = 39.7%

Core = 79.0%

25

Value = 72.5%

0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Mid-Cap Funds 100

As of Dec. 31, 2020: 75

50

Growth = 18.5%

Core = 71.9%

25

Value = 73.2%

0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Small-Cap Funds 100

As of Dec. 31, 2020: 75

Growth = 19.6% 50

Core = 71.8%

25

Value = 78.5%

0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Multi-Cap Funds 100

75

As of Dec. 31, 2020:

50

Growth = 55.2%

Core = 79.8%

25

Value = 83.6%

0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Source: S&P Dow Jones Indices LLC. Data as of Dec. 31, 2020. Past performance is no guarantee of future results. Charts are provided for illustrative purposes.

RESEARCH | SPIVA

7

SPIVA U.S. Scorecard

Year-End 2020

Exhibit 5: Percentage of International Equity Funds Underperforming Benchmarks (Rolling Three-Year

Returns)

Global Funds 100

International Funds 100

75

75

50

50

25

25

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

0 International Small-Cap Funds

100

75

0 Emerging Markets Funds

100

75

50

50

25

25

0

0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Source: S&P Dow Jones Indices LLC. Data as of Dec. 31, 2020. Past performance is no guarantee of future results. Charts are provided for illustrative purposes.

RESEARCH | SPIVA

8

 ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download