In the first half of 2022, 51% of large-cap funds underperformed the index.
Smaller-cap active managers did better than their large-cap counterparts in the first half of 2023: More than one-half (52%) of active midcap funds outperformed the S&P MidCap 400 index, which climbed 8.8% in the first half of the year. Moreover, almost three-quarters (72%) of active small-cap funds outperformed the S&P SmallCap 600 index, which rose 6% over that period.
Going back to 2001, large-cap fund managers outperformed the S&P 500 only three times in the full year — in 2005, 2007 and in 2009. In those three periods, 51%, 55% and 52%, respectively, of active large-cap funds outperformed the index.
The most extreme case was in 2014, when only 13% of active large-cap managers outperformed the index.
Over the longer period, underperformance for large-cap managers was more pronounced. For the 15-year period through June 30, 92% of large-cap equity funds underperformed the S&P 500.
"Twenty-three years of SPIVA data has taught us that successful active management is difficult, and the remarkable performance of the S&P 500's largest stocks made it particularly difficult in the first half of 2023," said Craig Lazzara, managing director-index investment strategy at S&P Dow Jones Indices, in a release issued in conjunction with the scorecard.
However, the scorecard revealed a dramatic difference between large-cap growth and value managers. Only 13% of large-cap growth managers underperformed the S&P 500 Growth index, which rose 21.2% in the first half of 2023, while 90% of large-cap value managers underperformed the S&P 500 Value index, which gained 12.2%.
To explain this discrepancy, S&P Dow Jones Indices suggested that the rebalancing of its U.S. style indexes in December 2022 might have been a factor.
"The communication services, consumer discretionary and information technology sectors came under particular pressure last year," S&P Dow Jones Indices wrote in the scorecard. "Since price momentum is one of the three variables that drive our stock-level growth scores, these sectors became more value-oriented. For example, S&P 500 Growth decreased its exposure to these three sectors by a total of 17%, while the S&P 500 Value index increased its exposure to the same sectors by 12.9%."
The "remarkable reversal" in sector returns between 2022 and the first six months of 2023, S&P Dow Jones Indices noted, "meant that last December's annual style rebalance had the effect of reducing the 2023 performance of the S&P 500 Growth index and increasing the 2023 performance of the S&P 500 Value index."
S&P Dow Jones Indices is a division of S&P Global.