A significant majority of active equity managers who invest in domestic equities trailed their respective benchmarks in 2016, with just 17.3% of Canadian equity funds outperforming the S&P/TSX composite index, according to the latest semi-annual results for the S&P Indices Versus Active Funds (SPIVA) Canada Scorecard.
Specifically, the equity market’s strong showing later in the year dragged down the performance of active managers, according to the SPIVA report, which claims to be the de facto scorekeeper of the active vs passive management debate.
During the 12-month period ended Dec. 31, 2016, equities markets posted double-digit returns, with the S&P/TSX composite index and the S&P/TSX 60 index delivering 21.1% and 21.4%, respectively, even though they recorded losses in the first quarter.
Within the Canadian dividend and income equity category, in particular, just 19.4% of funds outpaced the S&P/TSX Canadian dividend aristocrats index.
Similarly, the SPIVA report found that managers investing in the Canadian small- and mid-cap market couldn’t match the pace of S&P/TSX completion index, with only 19.4% of funds outperforming the index’s 20.50% return.
Managers within the Canadian focused equity markets were the only ones to come close to a “favourable” performance against their benchmark. Of this group, about 48.28% outdid the blended index, which spreads its weight across three indices, allocating 50% to the S&P/TSX composite index, 25% to the S&P 500 composite index and 25% to the S&P EPAC LargeMidCap.
Meanwhile, those investing in foreign equities fared slightly better in an overall comparison to those in the domestic market, with 23.8% of international equity managers and 24.14% of global equity managers beating the returns of the S&P 500 composite index.
Index returns are expressed as total returns, including dividend investment, in Canadian dollars.
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