Active equity has good year but suffers longer term

More than half of active UK equity funds outperformed last year, but three quarters underperformed over a 10-year period, according to S&P Dow Jones Indices (SPDJI).

Active equity has good year, but suffers long term

The index provider’s latest S&P Indices Versus Active Funds (Spiva) scorecard found 54% of UK active equity funds outperformed its UK BMI in 2017.

However, over a 10-year period 75% of UK active equity funds underperformed the index.

The Spiva scorecard charts the performance of actively managed funds against a range of SPDJI’s benchmark indices over one, three, five and 10-year periods. The S&P UK BMI is a subset of the index provider’s Europe BMI index, accounting for 363 of its 1,666 constituents (26.8%).

SPDJI also found active UK equity funds achieved an average asset-weighted excess return of 2% over one year and just 0.4% annualised over 10 years against the S&P UK BMI.

Small cap shines

Small cap funds performed particularly well last year. During 2017, 72% of UK actively-managed small cap stocks beat the S&P UK Small Cap index, generating average asset-weighted returns of 9% above the benchmark over the period.

However, again, over a 10-year period, the outperformance was just 0.6%.

In addition, last year 80% of managed UK small cap equity funds outperformed their benchmark, compared with fewer than half (46%) for the UK large-/mid-cap equity fund category.

The average asset-weighted returns for UK small-cap funds exceeded the S&P UK Small-Cap index by nine percentage points for the year.

Around the world

Elsewhere, 39% of actively-managed European equity funds underperformed the S&P Europe 350 index, increasing to 75% over a 10-year period.

For the US market, 67% of active equity funds failed to beat the S&P 500 over the one-year period. Over the past 10 years, 93% underperformed.

In emerging markets, 63% of actively managed EM funds underperformed the S&P/IFCI over the one-year period. This increased to 85% over the 10-year period.


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