Of the 169 investment funds that put up top-quartile performance numbers in 2020, only two maintained their position among the top 25% of funds in the four years that followed. That’s according to the Canada Persistence Scorecard (CPS), published last week by S&P Dow Jones Indices.
As reported in March, 88.7% of Canadian equity funds underperformed the benchmark S&P/TSX composite index in 2024, according to S&P Dow Jones. CPS is a follow-up report to the S&P Indices Versus Active Funds Canada Scorecard.
Besides last year being tough on active investors, “sustaining top-tier performance proved to be a significant challenge,” according to the report.
Canadian dividend and income funds fared better than those in other categories over the 2020–2024 period. Among those who ranked in the top quartile in the first year, 13.1% held their spot in the four years that followed. No single fund in any other category matched that accomplishment.
A smaller percentage of funds trading in domestic dividend and income funds managed to post top-quartile performance in the two consecutive five-year periods ending Dec. 31, 2024 — just 7.1%. Better than a quarter of fund managers in each of the Canadian small- and mid-cap equity (44.4%), global equity (34.2%), international equity (33.3%) and U.S. equity (29.6%) categories delivered top-quartile numbers in both five-year periods.
The report noted that under a random distribution, 25% of funds in any category would be expected to maintain consecutive five-year top-quartile results.
“Generating sustained alpha was an unattainable goal for most,” according to the report, “with a cross-category weighted average of only 2.3% of active equity funds that outperformed their benchmarks in 2022 managing to continue their outperformance across the following two years.”