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Score draw between active versus passive funds

Across all categories, except emerging market debt, more than three-quarters of active managers failed to beat their benchmarks, according to Standard & Poor's (S&P) Index Series.

By Fund Strategy
Thursday August 20, 2009

The mid-year 2009 results for the Standard & Poor’s Index Versus Active Fund Scorecard (Spiva) show divergent performance of equity and bond funds.

Over five years to June 30, the S&P 500 outperformed 62.9% of the actively managed large company mutual funds. The S&P MidCap 400 outperformed 73.4% of medium company funds and the S&P SmallCap 600 outperformed 57.4% of small-cap funds.

However, S&P says, asset weighted averages suggest a more level playing field, with active managers level or ahead of benchmarks in most categories except mid-caps and emerging markets.

Srikant Dash, the global head of research and design, says in a statement that the five-year data for equity funds can be interpreted favourably by both active and passive managers.

Advocates of passive management may argue that indices have outperformed most active fund managers across all major domestic and international equity sectors. The only exception was real estate.

On the other hand, active management believers can point to asset-weighted averages.

The Spiva scorecard, which is produced twice a year, evaluates the quarterly performance for American equity, international and fixed income mutual funds.


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