Standard & Poor's, the leading provider of financial market intelligence, released today the latest Standard & Poor's Indices Versus Active Funds Scorecard (SPIVA) for Canada. According to SPIVA, actively managed Canadian equity and small-cap funds lagged benchmark indices in the first quarter of 2007. Only 47.7% of Canadian equity funds outperformed the S&P/TSX Composite Index and just 47.6% of small-cap funds outpaced the S&P/TSX SmallCap Index. U.S. equity funds fared better, with 57.6% of funds in this category outperforming the S&P 500 Index.
"Looking over longer time periods, indices continue to outperform a majority of active funds," said Steve Rive, vice president of Canadian Index Services at Standard & Poor's. "Over the last five years, just 10.2% of actively managed Canadian equity funds have beat the S&P/TSX Composite Index."
In the same five-year period ended March 31, 2007, only 14.1% of U.S. equity funds outpaced the S&P 500 Index, while 49.3% of actively managed Canadian small-cap funds outperformed the S&P/TSX SmallCap Index.
Five-year average fund returns to the end of 2006 show active funds underperformed both the S&P/TSX Composite Index and the S&P/TSX Capped Composite, both on an equal- and asset-weighted basis, by roughly 300 basis points.
Survivorship
A key attribute of the SPIVA methodology is its correction for survivorship bias, which can significantly skew results as funds liquidate or merge. The five-year survivorship is 62% for the Canadian equity and 64% for the Canadian small-cap mutual fund categories, meaning that over one-third of funds in these categories has merged or liquidated in the past five years. For the U.S. equity fund category, during the same period, survivorship is only 41%. In other words, out of the total funds in this category that existed five years ago, less than half remain today.
About SPIVA
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- and equal-weighted averages and include survivorship bias correction to account for funds that may have merged or been liquidated during the period under study. Fund categorizations are as defined by the Canadian Investment Funds Standards Committee (CIFSC), and fund data is drawn from Fundata's mutual fund database.
The SPIVA Scorecard for Canada is issued quarterly by Standard & Poor's. The complete first-quarter SPIVA scorecard for Canada is available on www.spiva.standardandpoors.com.
About Standard & Poor's
Standard & Poor's, a division of The McGraw-Hill Companies (NYSE:MHP), is
the world's foremost provider of financial market intelligence, including
independent credit ratings, indices, risk evaluation, investment research and
data. With approximately 8,500 employees, including wholly owned affiliates,
located in 21 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
