Relatively weak Canadian equity returns in the first half of 2017 helped more active managers beat their 12-month benchmarks, but most active managers are still underperforming, according to a report published Tuesday from S&P Dow Jones Indices.
The latest edition of S&P's SPIVA scorecard shows only about one third of active managers beat the S&P/TSX composite index, net of fees, for the year ended June 30, while just 28.57% of U.S. equity managers beat the S&P 500 for the same period.
The one segment where at least half of active managers outperformed the benchmark was in the Canadian dividend and income category, which saw 51.43% of active managers outperform the S&P/TSX dividend aristocrats index. Canadian small/mid-cap equity managers came close, with 48.39% outperforming the S&P/TSX completion index.
"Compared with other international markets, Canadian equity markets posted relatively weaker returns over the one-year period. This, in turn, led to a higher percentage of active managers outperforming the benchmark, when compared with results from the second half of 2016. Nevertheless, the majority of active managers investing in domestic equity underperformed the benchmark," S&P notes in its report.
Over longer time periods, the record for active managers looks considerably worse. For example, althought more than half of managers in the dividend and income category beat the index over 12 months, for the previous 10 years, only 2.13% of funds are beating the index.
The U.S. equity category is among the worst performers over longer time horizons, S&P notes, with just 2.3%, 2.2%, and 2.5% of active managers beating the benchmark over three-, five-, and 10-year time periods, respectively.
Overall, most managers fail to outperform their benchmarks over 10 years, the research shows. For Canadian equity managers, just 8.9% beat the benchmark over 10 years. Small/mid-cap equity managers fare best, with 20.7% outperforming their benchmark over 10 years.
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