Most actively managed funds in Canada failed to consistently beat their benchmarks over longer periods, according to the latest Canada Persistence Scorecard released on Tuesday.
The scorecard, produced by S&P Dow Jones Indices, examines performance persistence over three and five years, using data from Fundata Canada Inc.
Across seven equities categories (Canadian, Canadian-focused, Canadian dividend and income, Canadian small- and mid-cap, U.S., global and international), not a single manager whose performance placed them in the top quartile in 2019 remained in the top quartile for the next four years, the scorecard found.
“Active management outperformance tends to be relatively short-lived, with few funds consistently outperforming their peers,” it said.
The persistence scorecard is an extension of the S&P Indices Versus Active Funds (SPIVA) Scorecard, which measures active management performance against market indexes.
S&P noted in the scorecard that 2023 was a “challenging” year for Canadian active managers, with 85% of funds in the Canadian equities category underperforming the S&P/TSX composite index.
Over two consecutive five-year periods, covering 2013 to 2023, 14% of funds in the Canadian equities category remained in the top quartile, below the 25% that would be expected under a random distribution, the scorecard said.
None of the top-quartile funds from 2021 in the categories of Canadian-focused, Canadian small- and mid-cap, international and U.S. equities maintained their positions in the top quartile for the subsequent two years, compared to an expected 6.25% based on chance, the scorecard said.