The majority of active managers failed to outperform their respective benchmarks in 2017, with the exception of Canada dividend and income equity funds, according to the 2107 year-end S&P Indices Versus Active Funds (SPIVA) Canada Scorecard.
Specifically, although broad market indices had a slow start in the first six months of the year, the indices posted high single-digit gains in 2017, with the S&P/TSX Composite and the S&P/TSX 60 returning 9.10% and 9.78%, respectively. The majority of the returns occurred in the second half of the year.
The bulk of active managers investing in domestic equity underperformed the benchmark, with only 6.78% of Canadian equity funds outperforming the S&P/TSX composite over the one-year period, according to the report.
However, yield-focused active strategies did well in 2017. Within the Canadian dividend and income equity category, 57.89% of funds outperformed their respective benchmarks over the one-year period. That said, over the 10-year period, no funds were able to outpace the S&P/TSX Canadian dividend aristocrats.
The one-year data also demonstrated unfavourable results for actively managed funds in the Canadian small-/mid-cap dquity category. Managers were not able to keep pace with the 7.05% return of the S&P/TSX completion index, which resulted in only 6.45% of managers outperforming the benchmark. Furthermore, on an asset-weighted basis, these funds had a one-year return of 2.40%, which represents a 4.64% shortfall from the index.
Over the same period, Canadian focused equity managers continued to be among the worst performers. Only 4.84% managed to outperform the blended index, which allocates 50% of its weight to the S&P/TSX composite, 25% of its weight to the S&P 500, and 25% of its weight to the S&P EPAC large-midcap index.
Over the long-term, the results were unambiguous across all domestic equity categories. The data for the five-year period showed the losing pattern repeating across all categories, as the majority of active managers underperformed their respective benchmarks.
The 10-year period showed further struggles for active managers, the report says, with less than one-quarter of funds outperforming.