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Q1 2020 Australia SPIVA® Results – Outperformance Still Prevalent Despite Market Volatility

Move over Millennials: ESG Investing Is a Multigenerational Conversation

How are India's Capital Markets Changing?

Seeking Durability in Dividends

Risk-Adjusted SPIVA® Year-End 2019 Scorecard: Most Active Managers Still Lagged

Q1 2020 Australia SPIVA® Results – Outperformance Still Prevalent Despite Market Volatility

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Stuart Magrath

Former Senior Director, Channel Management, Australia and New Zealand

S&P Dow Jones Indices

In early March 2020, S&P Dow Jones Indices released the SPIVA Australia Year-End 2019 Scorecard. With the market gyrations in late February and March due to the COVID-19 pandemic spreading across the globe, we decided to provide a “mid-term” SPIVA update to include data up to March 31, 2020, and to share the timely results through the webinar, Harnessing Active Vs. Passive Findings During Times of Market Turbulence. So, what did we find?

Q1 2020 Market Performance

With the exception of Australian bonds, all asset classes suffered drawdowns, with the S&P/ASX 200 seeing a drawdown of 23%. The S&P/ASX 200 A-REIT experienced a drawdown of 34.4%.

Q1 2020 Fund Performance

As Exhibit 2 shows, for the three-month period ending March 31, 2020, 61.2% of funds in the Australian Equity General category were outperformed by the S&P/ASX 200. This was more or less in line with the results as of Dec. 31, 2019. What becomes more interesting is when we look at the results on a month-by-month basis, we saw a steady improvement in the performance of funds in that category across the three-month period, with the number of funds outperformed by the benchmark decreasing from 78.4% to 50.8%. To put this another way, in January 2020, 21.6% of funds outperformed the benchmark, in February 2020, this increased to 41.5%, and in March 2020, it increased to 49.2%. The volatile market appears to have provided active fund managers opportunities to outperform the benchmark, although the benchmark still outperformed greater than 50% of funds.

Other fund categories were also not able to beat the benchmark in Q1 2020, with the exception of A-REITs. For the three-month period, 39.3% of A-REIT funds were outperformed by the benchmark.

While opportunities for outperformance by active fund managers may have increased in Q1 2020, most continued to underperform their relevant benchmarks. The challenge remains. How can investors, or financial advisors, select outperforming funds in advance? 2020 hindsight continues to prevail in 2020.

How Does SPIVA Assist Financial Advisors?

David Haintz of Global Adviser Alpha joined our mid-term SPIVA results webinar and provided a wealth of advice for financial advisors. David’s advice can be heard starting at minute 23:45. A couple of key takeaways from his advice include the following.

  • Rather than using the terms active and passive for investing, David suggests using the terms forecasting (active investing) and non-forecasting (passive investing). He is an advocate for non-forecasting, as when put to the test, the forecasters have not been able to demonstrate an ability to pick stocks, market timings, or active managers so that they consistently outperform relevant benchmarks. SPIVA has been a key tool in supporting a non-forecasting approach.
  • When adopting a non-forecasting approach to investing, David suggests advisors take a three-step approach.
    1. Understand: Gather data and understand whether options available to clients add value or subtract value. SPIVA is a great resource to aid in your understanding;
    2. Believe: Look at the available alternatives and start to believe in what will be the best possible option for your clients; and
    3. Articulate: Once an advisor understands and believes in a non-forecasting approach, the articulation of that proposition is easy, as there is so much evidence for non-forecasting that your passion for this approach will naturally flow as you talk to your clients.
  • Finally, when adopting a non-forecasting approach, be aware that this does not inoculate clients from negative markets. Keep your conversations with clients focused on their goals and aspirations, rather than on returns over 1, 3, or 12 months.


The posts on this blog are opinions, not advice. Please read our Disclaimers.

Move over Millennials: ESG Investing Is a Multigenerational Conversation

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Margaret Dorn

Senior Director, Head of ESG Indices, North America

S&P Dow Jones Indices

The COVID-19 pandemic has shaken financial markets and led many market participants to take a closer look at their investments. While emotionally and psychologically challenging, these selloffs can create opportunities to enhance long-term portfolio objectives. In this environment, advisors can demonstrate their value by helping clients invest in strategies they find meaningful and motivating.

Investors are reimagining the future state of investing in the aftermath of the pandemic, and record flows into environmental, social, and governance (ESG) ETFs undoubtedly reflect that mindset (see Exhibit 1). Assets in ESG ETFs and ETPs listed globally increased by 4.93% at the end of February 2020, to a new record of USD 67.99 billion.[1]

The recent surge of ESG ETF asset growth raises the question of who is investing in ESG-focused funds.

For years, ESG adoption has focused on millennials and their influence on sustainable investing. What has been consistently ignored, however, is that investors from all generations want to learn more about ESG investing and how best to put their values into action. Surprising to some, this includes the baby boomer generation. Let us not forget that many millennials inherited their core values from their baby boomer parents, whose activism and strong voices led to the establishment of the first sustainable funds in the 1970s. A recent report found that “baby boomers are more likely than millennials and Gen Xers to say that the reason they want to participate in ESG investing is to encourage companies to be good corporate citizens,”[2] which is an inspiring perspective, especially in the current environment.

It is increasingly evident that all generations wish to educate themselves on how to make ESG investment decisions and how to best align their investment objectives with their values. However, an additional objective shared by baby boomers, Gen Xers, and millennials alike is that aligning investments with their values not come at the cost of investment performance.

The S&P 500® ESG Index helps dispel the myth that a trade-off must exist between ESG principles and performance. Rather than detract from performance, ESG data can enhance visibility into financially material metrics that have not always been captured by traditional regulatory filings and standard financial analysis. In the past year, the S&P 500 ESG Index has provided a sustainable alternative to the iconic S&P 500, with similar risk and return, but with an additional lens into the constituents’ ESG principles (see Exhibit 2). While the recent outperformance is a welcomed result, it is important to note that the S&P 500 ESG Index does not aim to outperform its S&P 500 benchmark. It does, however, aim to achieve a considerable improvement in overall ESG performance by retaining companies with notable positive impacts such as an increase in female representation across management positions, a reduction in greenhouse gas emissions, and effective promotion of a risk culture.[3]

While indices like the S&P 500 ESG Index have continued to push the often marginalized conversation around sustainable investing into the mainstream, there remains boundless opportunity for financial professionals to educate all their clients on the reality of ESG investing. Advisors taking a proactive approach by initiating the ESG conversation are likely to be surprised by the openness of clients of all ages to engage around the topic in the current environment and beyond.

[1]   ETFGI reports ESG ETFs and ETPs listed globally gathered USD 7.54 billion in net inflows during Feb. 28, 2020.

[2]   Allianz Global Investors, Socially Responsible Investing and ESG: It’s Not just a Millennial Trend. August 2019.

[3]   For more information on the S&P 500 ESG Index, visit

The posts on this blog are opinions, not advice. Please read our Disclaimers.

How are India's Capital Markets Changing?

COVID-19 has left its mark on India’s capital markets, as gains of the past five years were given back in Q1 2020. S&P DJI’s Ved Malla takes a closer look at how India’s sectors have held up amid uncertainty.

Read more here:

The posts on this blog are opinions, not advice. Please read our Disclaimers.

Seeking Durability in Dividends

Do the S&P 500 High Yield Dividend Aristocrats provide durability during times of distress? S&P DJI’s Anu Ganti explains how dividend growers are positioned for the current climate.

Learn more here

The posts on this blog are opinions, not advice. Please read our Disclaimers.

Risk-Adjusted SPIVA® Year-End 2019 Scorecard: Most Active Managers Still Lagged

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Berlinda Liu

Former Director, Multi-Asset Indices

S&P Dow Jones Indices

In addition to absolute returns, institutional investors also evaluate active funds by risk-adjusted returns. This is not surprising since Modern Portfolio Theory tells us that higher returns tend to be associated with higher risk.

Our Risk-Adjusted SPIVA Scorecard was introduced in 2018 as an extension of the standard SPIVA Scorecards.

  • It aims to assess whether actively managed funds generate higher risk-adjusted returns than their corresponding benchmarks.
  • We consider volatility, calculated through the standard deviation of monthly returns, as a proxy for risk, and we use return/volatility ratios to evaluate performance.
  • Given that indices do not incur costs, we also present gross-of-fees performance figures by adding the expense ratio to net-of-fees returns. In this way, generally, higher risk should be compensated by higher returns.

Now, let’s look at the most recent report from year-end 2019.

U.S. Equity Funds: Scarce Outperformance

The Risk-Adjusted SPIVA Year-End 2019 Scorecard shows that, after adjusting for risk, most U.S. Equity Funds across all categories underperformed their benchmarks over mid- and long-term investment horizons, net of fees. Even on a gross-of-fees basis, outperformance only appeared in a few categories: Real Estate (over 5 and 15 years), Large-Cap Value (over 15 years), and Mid-Cap Growth funds (over 5 years). This is particularly noteworthy since the equity market was experiencing one of the longest bull markets during this period, with S&P 500® gaining 257%.

International Equity Funds: Most Funds Fell Short

As in the U.S., most international equity funds across all categories generated lower risk-adjusted returns than their benchmarks when using net-of-fees returns. On a gross-of-fees basis, only International Small-Cap funds outperformed over the 10- and 15-year periods.

Fixed Income Funds: Fees Were Critical

Fees played a critical role in fixed income fund performance. When using net-of-fees risk-adjusted returns, most actively managed fixed income funds in most categories underperformed over all three investment horizons. The exceptions were Government Long, Investment Grade Long, and Loan Participation funds (over 5 and 10 years), as well as Investment Grade Short funds (over 5 years). However, unlike their equity counterparts, most fixed income funds outperformed their respective benchmarks gross of fees.

Large versus Small: Size Mattered

On a net-of-fees basis, asset-weighted return/volatility ratios for active portfolios were higher than the corresponding equal-weighted ratios, indicating that larger firms have taken on better-compensated risk than smaller ones.

On a gross-of-fees basis, most fund categories produced higher return/volatility ratios than their benchmarks when equally weighted. However, their outperformance diminished once fees or fund size were accounted for, especially in domestic and international equity funds. In general, equal-weighted return/volatility ratios improved more than the corresponding asset-weighted ratios when fees were ignored, indicating that fees played a prominent role in smaller funds’ performance.


While our SPIVA Scorecards typically show that active funds underperform their benchmarks in absolute returns, defenders often argue that active funds may be superior to passive investment after adjusting for risk. The Risk-Adjusted SPIVA Year-End 2019 Scorecard demonstrates that history showed us quite the opposite: most active funds lagged their benchmarks over the long term, and exceptions were even more scarce when fees were counted for.

The posts on this blog are opinions, not advice. Please read our Disclaimers.