"Over the first six months of 2004, benchmark indices are ahead of a majority of actively managed funds for all nine style boxes," said Srikant Dash, Index Strategist, Standard & Poor's. "This result is in sharp contrast to the first half of 2003 when active funds were ahead in all but two style boxes."
Rosanne Pane, Mutual Fund Strategist at Standard & Poor’s noted, "The current market has been in a trading range with the S&P Composite 1500 returning 1.33% in the second quarter and 3.4% in the first six months. In 2003, active funds that were over-weight in economically sensitive industries participated in the robust market rebound in the second quarter when the S&P Composite 1500 returned 15.2%.”
The latest report shows longer-term results, however, being in line with past observations. For the five-year period through June 30, 2004, the S&P 500 has outpaced 53.4% of large-cap funds, the S&P MidCap 400 outperformed 85.1% of mid-cap funds, and the S&P SmallCap 600 edged out 76.0% of small-cap funds. Results for the three-year term are similar: 65.5% of large-cap funds, 78.3% of mid-cap funds, and 76.0% of small-cap funds fared worse than their index benchmark.
Based on a comparison of equal- and asset-weighted returns, the SPIVA Scorecard showed that funds with bigger assets have outperformed their smaller fund counterparts this year, with smaller funds faring better than their larger counterparts in only one style box. “Funds with smaller asset sizes can be more nimble in reacting to market trends,” said Pane. “This ability did not help smaller funds in 2004’s trend-less market.”
SPIVA also reviews index fund performance and costs. The asset-weighted average fees for S&P 500, S&P MidCap 400 and S&P SmallCap 600 funds are 0.15%, 0.32% and 0.30% respectively.
Survivorship
A key attribute of the SPIVA methodology is its correction for survivorship bias, which can significantly skew results as funds liquidate or merge. Over the last 12 months, 6.5% of general equity funds have merged or liquidated. The corresponding figures for last three and five years is 17.3% and 21.2% respectively. This quarter, 2519 actively managed funds were used in the quarterly analysis and 1989 funds were used for the five-year numbers.
The complete second quarter SPIVA scorecard, previous quarterly SPIVA reports, including SPIVA Japan scorecards are available on www.spiva.standardandpoors.com and the quarter report is attached below.
About SPIVA
The SPIVA scorecard reveals quarterly performance data for domestic equity mutual funds benchmarked against nine corresponding S&P indices and eight sector indices, including the S&P 500 for large-cap funds, the S&P MidCap 400 for mid-cap, the S&P SmallCap 600 for small-cap, and the S&P Composite 1500 for broad market comparisons. The S&P/BARRA growth and value indices are used for style categories. S&P 500 sector indices and the S&P REIT index are used for sector categories. The SPIVA methodology is designed to provide an accurate and objective apples-to-apples comparison of funds’ performance versus their appropriate style indices, correcting for factors that have skewed results in previous index-versus-active analyses in the industry. SPIVA scorecards show both asset-weighted and equal-weighted averages, include survivorship bias correction to account for funds that may have merged or been liquidated during the period under study, and show style consistency for each style group across different time horizons.
About Standard & Poor’s
Standard & Poor's, a division of The McGraw-Hill Companies (NYSE:MHP), is the world's foremost provider of independent credit ratings, indices, risk evaluation, investment research, data and valuations. With 5000 employees located in 20 countries, Standard & Poor's is an essential part of the world's financial infrastructure and has played a leading role for more than 140 years in providing investors with the independent benchmarks they need to feel more confident about their investment and financial decisions. For more information, visit www.standardandpoors.com.
Click here to download the S&P Indices Versus Active Funds (SPIVA) Scorecard for the second quarter 2004.
