Last year’s volatility offered an opportunity for active managers to outperform; however, that largely wasn’t the case, according to the S&P Indices Versus Active (SPIVA) Canada scorecard published on Thursday.
The SPIVA scorecard measures the performance of actively managed funds against their S&P Dow Jones Indices benchmark indexes.
Almost nine in 10 (88%) funds in the Canadian equities category underperformed their benchmark in 2020, the report said. The result was in line with the 84% of equities managers underperforming over the past decade.
Last year’s underperformance was “particularly notable,” the report said, as the funds’ 0.81% return was 4.8% below the S&P/TSX Composite’s 5.6% gain (equal-weighted).
The relative performance was the worst of any category in the scorecard.
The best performance went to Canadian small- and mid-cap equities funds, which had a “banner year,” the report said: only 22% of the funds underperformed the S&P/TSX Completion index.
The category gained an average of 14.3% on an equal-weighted basis, while the index returned 6%.
However, 71% and 91% of the category’s funds fell short over the three- and five-year periods, respectively.
Canadian dividend and income equity funds took second place, with 44% of the funds lagging the S&P/TSX Canadian Dividend Aristocrats index in 2020.
The index lost 2.3% for the year, and the funds lost 1.2%, on an equal-weighted basis. It was the only category with negative returns.
Over a decade, 91% of funds in the category underperformed the benchmark.
While funds outside Canada provided opportunity for overall better returns, the report said, “active management still broadly failed to add value.”
The U.S. equity funds category posted the highest returns over the past year, with a 13.6% gain on an equal-weighted basis and 17.4% on an asset-weighted basis.
Yet, more than two-thirds (69%) of the funds failed to clear the S&P 500’s 16.3% return.
Over the past decade, close to all U.S. equity funds failed to keep up: 95% fell short of the benchmark, by an average of 4.1% per year on an equal-weighted basis, the report said.
For full details and categories, read the SPIVA Canada scorecard.