The SPIVA Latin America Mid-Year 2017 Scorecard was released this week. The report covers Brazil, Chile, and Mexico in selected fund categories. In line with the rest of the world, widespread gains were seen in both fixed income and equity markets in Latin America in the first six months of 2017.
The recent rise in the markets didn’t lead to outperformance by active fund managers against category benchmarks, as the majority of managers underperformed across all categories measured. The percentage of funds outperformed by benchmarks in each category for the one-, three-, and five-year performance lookback periods are shown in Exhibit 1.
In addition to reporting outperformance, the SPIVA scorecard calculates the average fund returns on an asset-weighted and equal-weighted basis. Conventional wisdom says that funds with larger asset bases have higher economies of scale and better execution than smaller funds, thereby potential ly delivering higher net returns all else equal. Therefore, if asset-weighted returns are higher than equal-weighted returns, then larger funds did better than smaller funds. Using data from Report 3 and Report 4 in the SPIVA scorecard, Exhibit 2 compares asset-weighted and equal-weighted returns over a five-year time horizon.
For six of the seven categories, asset-weighted average returns are higher than equal-weighted average returns—the lone exception being Chile Equity. The most notable difference in returns is in the Brazil Equity category, with the asset-weighted average return 3.1% higher than the equal-weighted average return.