As markets continued to favour the largest companies, a majority of actively managed funds struggled to keep up with their benchmarks, according to S&P Dow Jones Indices’ latest SPIVA Global Scorecard.
Across 56 equity and fixed income fund categories analysed over the six-month period ending in June, a majority of funds underperformed in over two-thirds of reported categories. Of the 8,417 unique funds represented across all the half-year statistics, a similar 64 per cent of individual funds underperformed their assigned benchmark.
This trend was most pronounced in global equity markets, where funds domiciled in the US, Europe, Japan, Canada, and Australia underperformed the S&P World Index. Underperformance rates in these markets ranged from 70 per cent to as high as 85 per cent.
“Part of the disappointing performance of actively managed global equity funds may have been down to the difficulty of outperforming in the US component, with majorities ranging between 57 per cent to 78 per cent of US equity-focused funds in the US, Europe, Japan and Canada underperforming the S&P 500,” S&P said.
“There were also challenging headwinds in other developed equity markets, including the continental Europe majors of Switzerland, France and Germany, where 76 per cent, 85 per cent and 88 per cent of local active funds underperformed, respectively,” it added.
However, some pockets of outperformance emerged, offering a glimmer of hope for active managers.
In the US, small-cap funds bucked the broader trend, with 85 per cent of actively managed funds outperforming the S&P SmallCap 600.
The Middle East also saw continued strong results, building on a successful 2023, with a similar percentage of funds surpassing the S&P Pan Arab Composite LargeMidCap Index.
Additionally, active funds in markets like South Africa and Mexico fared relatively well, with beat rates hovering around or above 50 per cent.
S&P also reported other bright spots in active performance, particularly in fixed income categories.
“On both sides of the Atlantic, lower-credit and less-liquid bonds broadly outperformed and, since both are often seen as sources of potential excess returns, it may not be surprising that the US dollar and euro-denominated fixed income markets hosted some of the most fertile grounds for actively managed funds,” it said.
