Canadian equity active funds fared significantly better than international equity funds in the fourth quarter of 2008, Standard & Poor’s reported on Tuesday.

The latest results for the Standard & Poor’s Indices Versus Active Funds Scorecard for Canada shows that 53.2% of Canadian equity active funds outperformed the S&P/TSX composite index in the fourth quarter of 2008. The scorecard reports the performance of actively managed Canadian mutual funds corrected for survivorship bias, and shows equal- and asset-weighted peer averages.

The findings also show that 53.7 % of active funds in the small/mid cap equity category beat the S&P/TSX completion index.

In contrast, in the Canadian focused equity category only 25.3% of active funds outperformed the blended benchmark of 50% S&P/TSX composite, 25% S&P 500 and 25% S&P EPAC LargeMidCap Index.

The results show that the majority of active mutual funds investing outside of Canada were unable to keep pace with their benchmarks. Only 36.7% of active U.S. equity funds outperformed the S&P 500, 21.3% of international equity funds outperformed the S&P EPAC LargeMidCap Index and only 25.2% of global equity funds outperformed the S&P Developed LargeMidCap Index.

“This quarter’s results show a great deal of disparity between active fund performance of domestic equity versus non-domestic equity categories,” said Jasmit Bhandal, director at Standard & Poor’s. “The majority of active funds in the Canadian equity categories have been able to add value during a difficult fourth quarter, while the opposite is true for active funds investing outside of Canada.”

The majority of active funds underperformed their respective S&P benchmark over one-, three- and five-year periods. Only 41.9%, 21.0% and 11.2% respectively, of active Canadian equity funds were able to outperform the S&P/TSX Composite Index over these periods respectively. For active funds in the Canadian focused equity category, 34.6%, 26.2% and 42.9% of funds outpaced the blended S&P/TSX Composite benchmark index over the one, three- and five-year periods respectively.

The survivorship bias correction in the scorecard reveals that a significant percentage of funds in equity categories has been merged or liquidated over the past five years. Survivorship over the past five-years is 44.9% for Canadian equity, 42.5% for U.S. equity, 62.1% for international equity, and 43.3% for global equity.

IE