Do Security Analysts Pick Winners?: April 8, 2012

Standard & Poor’s (S&P) recently released their year-end 2011 S&P Indices versus Active Funds [SPIVA] Scorecard.  The Scorecard is designed to compare the performance of actively managed mutual funds against their appropriate benchmark indices (the PDF can be found here).

 

Audited by professional accountants and publicly available for all to see,  mutual fund returns are a good source of data on the effectiveness of active manager research and analysis efforts.  The only consistent data that S&P observed over a five-year horizon is that the majority of active equity and bond managers in most categories lag comparable benchmarks.

 

For the five-year period ending December 31, 2011 S&P reports that only 32% of U.S. large cap core funds outperformed the S&P 500 Index on an annual basis.  Results were even less favorable for non-US markets.  Just 22% of international funds and 17% of emerging markets funds beat their benchmarks.