Active Global Equity Funds Underperformed Last Year

SPIVA Europe scorecard says some 71% of active U.S. equity funds failed to beat flagship benchmark.

Reviewed by: Ron Day
Edited by: Staff

Most actively managed global equity funds trailed the S&P World index again last year, highlighting the challenges active managers face when aiming to beat their benchmarks.

According to the S&P Dow Jones Indices’ SPIVA Europe scorecard, 84% of actively managed global equity funds failed to beat the S&P World index. In European equities, 83% of euro-denominated pan-European equity funds fell short of the S&P Europe 350 benchmark annually.

Longer-term results were even less favorable, with underperformance rising to 90% over five years and 92% over 10 years. Active U.S. equity funds also fell short, with 71% not meeting the S&P 500's returns in one year. The underperformance has increased over time, reaching 93% in five years and 98% in 10 years.

This was the third-highest ranking underperformance over a 10-year period, behind Nordic and Denmark equity funds. Similarly, performance was subdued in other categories—58% of U.K. equity funds underperformed the S&P United Kingdom BMI in one year—with an 81% underperformance over 10 years.

The underperformance of actively managed equity funds is in keeping with findings reported in the first half 2022 and 2021 SPIVA Europe Scorecard.

The former found that 96% of U.K. large and mid-cap equity funds underperformed the S&P UK LargeMidCap benchmark in the first half of 2022.

Meanwhile, the 2021 report found that half of all global, US, Europe and UK equity funds have shut over the last 10 years, with only 50.4% of euro-denominated global equity funds surviving between 2011 and 2021.

While underperformance has been consistent across equities, fixed income funds varied across categories and currencies, with many active managers outperforming.

The majority of euro-denominated corporate bond funds (53%) failed to beat the iBoxx EUR Corporates benchmark.

The trend was more pronounced in high yield (67%) and government bond (82%) categories in euros.

In contrast, only 24% of UK corporate bond sterling funds underperformed while 79% of US-based global corporate bond US dollar funds failed to meet their benchmarks.