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Fewer than four in five actively managed Canadian funds added value in 2024, according to S&P Dow Jones Indices. The S&P Indices Versus Active Funds Canada Scorecard reported Friday that 88.7% of Canadian equity funds, 80% of Canadian focused equity funds and 95.8% of dividend & income equity funds underperformed relative to their benchmarks. A lower number — 71.6% — of international equity funds did more poorly than the benchmark.

The S&P/TSX composite index rose 21.7% in 2024, while the S&P 500 climbed 36.4% in Canadian dollars, according to S&P Global. All of the benchmarks used in the report delivered double-digit gains for the year.

“One might assume that high levels of benchmark performance are associated with greater proportions of active fund underperformance as, for many, the threshold for success rises further out of reach,” S&P Global said in its report. “However, in the category of Canadian equity funds, history shows that alpha has usually been elusive for the majority of managers in all types of markets.”

A majority of actively managed Canadian equity funds have fallen short of their benchmark in nine out of the last 10 years. During four of those nine years, the benchmark indexes delivered single-digit or negative returns.

“Over the 10 years ending in December 2024, Canadian equity calendar-year underperformance rates averaged 75.5%, with single-year underperformance rates relatively unrelated to overall market performance,” the report said.

The percentage of funds — in multiple categories — underperforming their benchmark over one-, three-, five- and 10-year periods ranges from 71.6% to 100%.

The report noted that the strong performance seen on these benchmark indexes in 2024 was driven by a relatively small number of companies. Stocks that delivered positive returns in 2024 made up a minority of equities on all of the study’s benchmarks — from 29.4% of the S&P 500 to 46.9% of the S&P EPAC LargeMidCap, according to S&P Global.

“Like many markets globally, Canadian indices reflected investor exuberance in 2024, generating strong performance, but also periods of volatility and uncertainty,” S&P analysts wrote. “In this environment, opportunities to generate outperformance through astute stock selection, sector and capitalization tilts were present, but difficult to capture. Those few active funds able to outperform in 2024 were part of a select group whose ranks grew even thinner over longer time horizons.”