Performance versus a benchmark - A better SPIVA year?

 

It is always depressing for active managers to look at the Standard and Poor's Index versus Active (SPIVA) scorecards. Market efficiency lives! However, there are few managers who can beat the benchmarks. For the last year (mid-2020-mid-2021), 42 percent of large cap funds outperformed the SPX. Of course, over the last 10 years, only 17 percent did better. Managers can win in a given year, but time is not friendly to active funds.

In the case of fixed income, 85 percent beat the intermediate government/credit bond index. Managers seem to be better able to beat fixed income benchmarks; however, on a risk-adjusted basis only 10% outperform the benchmark. 

This poor performance explains why the growth for ETF and index businesses have been so strong and why active bets are often placed with hedge fund managers who may have fewer restrictions.