Over the past twelve months, growth managers have outperformed their index benchmarks across large, mid and small cap categories. "Growth managers have benefited from the aggressive recovery in the stock market," notes Rosanne Pane, Mutual Fund Strategist at Standard & Poor's. "Over the past year, 74.0% of large cap growth funds, 57.7% of mid-cap growth funds and 58.4% of small-cap growth funds have outperformed their index benchmarks."
Over longer time periods, indices continue to be clear winners. Over the last five years, the S&P 500 outperformed 52.3% of large-cap funds, the S&P MidCap 400 outperformed 86.2% of mid-cap funds, and the S&P SmallCap 600 outperformed 72.7% of small-cap funds. Over the last three years, the S&P 500 outperformed 65.5% of large-cap funds, the S&P MidCap 400 outperformed 84.5% of mid-cap funds and the S&P SmallCap 600 outperformed 71.1% of small-cap funds.
Index Fund Analysis
Starting this quarter, SPIVA reports include performance of index funds versus comparable active blend managers on both an equal- and asset-weighted basis. Over the past five years on an equal-weighted basis, 50.3% of active large-cap blend funds outperformed S&P 500 index funds. S&P MidCap 400 index funds outperformed 78.1% of active mid-cap blend funds and S&P SmallCap 600 index funds outperformed 60.0% of actively managed small-cap blend funds.
"Among index funds, five-year asset weighted average returns are greater than equal weighted returns," notes Srikant Dash, Index Strategist at Standard & Poor's. "This suggests that index funds with greater asset sizes have performed better by benefiting from economies of scale."
The SPIVA report also found that on an asset-weighted basis, the average expense ratio for S&P 500 index funds is 0.154%, S&P MidCap 400 index funds is 0.319%, and S&P SmallCap 600 index funds is 0.298%. "Keeping track of expense ratios is as important for index funds as for active funds as there can be a wide discrepancy among funds," added Dash.
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 past year, 6.8% of general equity funds were liquidated or merged. The corresponding figures for the previous three and five years are 16.4% and 20.3%, respectively. This quarter, 2286 actively managed funds were used in the SPIVA analysis and 1945 were used to for five-year numbers.
The complete first quarter SPIVA scorecard, previous quarterly SPIVA reports, and a new SPIVA Japan scorecard are available on www.spiva.standardandpoors.com.
Inclusion of a security in an S&P index does not represent an endorsement by S&P of the investment merits of the security.
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 for the SPIVA scorecard.
