In late March, Standard & Poors released the year-end 2012 Index Vs. Active report, or SPIVA. This study evaluates the overall success of actively managed mutual funds, reporting just how how these funds have performed relative to their benchmarks.
As it has in the past, the study makes a compelling argument against the use of active management. Below, we can see that in practically every time period and category, the majority of active managers under perform their benchmarks. Interestingly, as time periods get longer (5 year returns over one year returns), more and more funds underperform.
There are several other noteworthy items in the report:
- Nearly 27% of domestic equity funds were merged or liquidated over the past five years. Typically this happens as a result of poor performance in an attempt to “hide” the track record.
- Under-performance is consistent across domestic equity, foreign equity and fixed income markets.
- Under-performance is consistent in bear markets (2008) and bull markets (2009-2012).
You can read the report in its entirety here.
Bason Asset Management 