<!-- Swiftype Variables -->

Investing

Active midcap and small-cap equity managers outperform benchmarks in 2017, SPIVA U.S. Scorecard finds

For longer time periods, active managers underperformed relative to their benchmarks

Active midcap and small-cap equity managers had a strong 2017 in the U.S., said S&P Dow Jones Indices' SPIVA U.S. Scorecard; while in Europe, active U.S. and global equity funds domiciled there were less successful than European equity funds, the SPIVA Europe Scorecard showed.

The SPIVA U.S. Scorecard notes that while active managers had a strong year respective to their benchmarks, they still underperformed over longer-term investment horizons. In the year ended Dec. 31, 36.9% of active domestic large-cap managers outperformed the S&P 500 index, which returned 21.83%. This was an improvement over the 34% of active domestic large-cap managers that outperformed the S&P 500 in 2016. Of active domestic midcap equity managers, 55.6% outperformed the S&P MidCap 400 index — which returned 16.24% — in the year ended Dec. 31, compared to 10.6% in 2016; and of active domestic small-cap equity managers, 52.3% underperformed the S&P SmallCap 600 index — which returned 13.23% — in the year ended Dec. 31, compared to 14.5% that underperformed the index in 2016.

Over longer investment horizons, however, active domestic equity managers lagged their respective benchmarks. Over the five-year period ended Dec. 31, only 15.8% of active domestic large-cap equity managers, 5.2% of active domestic midcap equity managers and 8.8% of active domestic small-cap equity managers outperformed their respective benchmarks. The S&P 500, S&P MidCap 400 and S&P SmallCap 600 had annualized returns of 15.8%, 15% and 16% in the five years ended Dec. 31.

Over 10-year and 15-year horizons, active domestic large-cap value equity managers were the best-performing asset class across nine U.S. style categories, according to the scorecard. Over the 10 and 15 years ended Dec. 31, 29.6% and 14.3% of managers, respectively, outperformed the S&P 500 Value index, which returned an annualized 6.8% and 9.4%, respectively, over those time periods.

Meanwhile, according to the SPIVA Europe Scorecard, 53.4% of active European equity funds outperformed the S&P Europe 350 index, which returned 10.8% in the year ended Dec. 31, while 46.2% and 28.8%, respectively, of global and U.S. equity funds outperformed their benchmarks. The S&P Global 1200 and S&P 500 indexes returned 8.6% and 7%, respectively, in terms of euros.

Similar to the U.S., the majority of active managers underperformed their benchmarks when looking at longer-term investment horizons. In the 10 years ended Dec. 31, only 14.6% of active European equity managers outperformed the S&P Europe 350, which had an annualized return of 3.46%, and only 1.15% and 2.2%, respectively, of active global and U.S. equity managers outperformed their benchmarks. The S&P Global 1200 and S&P 500 had annualized returns of 7.7% and 10.6%, respectively, in the 10 years ended Dec. 31, in terms of euros.

The SPIVA U.S. Year-End 2017 Scorecard and SPIVA Europe Year-End 2017 Scorecard are available on Dow Jones Indices' website.