Canadian equity markets enjoyed a strong first half of 2019, but most active fund managers lagged their benchmarks, according to S&P Dow Jones Indices.

The latest semi-annual report from S&P, which compares actively-managed Canadian mutual funds with their benchmarks, finds that the vast majority (over 85%) of Canadian equity managers underperformed the S&P/TSX Composite in the 12-month period to June 30.

By asset class, international equity managers fared the best, with almost half (46%) of managers beating their benchmark in the year to June 30.

Conversely, small cap managers performed worst, with 88% lagging their benchmark.

In part, this reflects the fact that small caps led the way in the first half, with the S&P/TSX Completion index edging out the S&P/TSX 60 index.

The report also noted that 88% of dividend and income equity fund managers underperformed their benchmark to June 30.

In the longer term, the vast majority of active managers are falling short of their benchmark, S&P reported.

It notes that 94% of active managers underperformed the S&P/TSX Composite index in the three years to June 30, and 88% underperformed over five- and 10-year periods.

“Things were particularly bleak for the dividend and income equity fund category, as no manager was able to outperform the benchmark over the 10-year period,” the report said.

The report also noted that less than half (46%) of the Canadian equity funds that existed 10 years ago were still active in June.

The Canadian-focused equity category fared worst, with less than 35% of funds remaining active over 10 years.