A recent study by S&P Dow Jones Indices once again illustrates that active managers have trouble beating the indexes, especially over the long term.
There seems to be no end in sight to the debate between advocates of active investing and those promoting a passive strategy, with the former defending their ability to deviate from the index and outperform the market and the latter insisting on their very competitive cost structures. To settle the question once and for all, surely all that matters is whether active managers are really able to generate the much touted alpha? … SPIVA Scorecards to the rescue!
The Standard & Poor's Index Versus Active (SPIVA) quarterly scorecards were introduced in 2002 to provide easy to understand performance data and drive the active vs. passive debate forward. If recent statistical results from the Spiva Europe Scorecard are anything to go by, then proponents of passive management win the contest hands down.
The scorecard compared the performance of actively managed funds on the European market to that of their S&P benchmarks over periods of 1, 3, 5 and 10 years. Results show that over a 1 year period, from 30 June 2014 to 30 June 2015, only 41% of active funds in the Eurozone category managed to match or outperform their benchmark indices. This progressively worsens the longer the time period taken into account, with 92% of Eurozone funds failing to meet their benchmarks over a 10 year period.
The result for US funds is even worse, with only 1,6% of actively managed funds beating the market over a 10 year period, suggesting that it is exceedingly difficult for even the most seasoned money managers to beat efficient markets such as the American one.
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