Tag Archives: active vs. passive

Nov 9, 2020

Risk-Adjusted SPIVA®: No More Excuses?

For the first time, the SPIVA Europe Mid-Year 2020 Scorecard introduced risk-adjusted performance evaluations of European equity funds. Previously, proponents of active fund management may have criticized the SPIVA scorecard for measuring performance on a return-only basis. They may have argued that this only told one side of the story, and that their abilities should…

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Oct 22, 2020

Indian Investments in Global Equities: From Zero to Hero

India has been one among many countries that favor a strong home bias in their investment portfolios. There have been many theories put forth on what causes the bias and research has been undertaken to understand it. Whether it is the ease of local information access, regulatory concerns, investor preferences, cost concerns, transactional viability, or…

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Oct 7, 2020

Not a Coincidence

We recently issued our mid-year SPIVA® reports for the U.S., Australia, and Europe, and other regions will follow in due course. Although one can sometimes find exceptions in the short run, the long-term results of SPIVA can be easily summarized: The majority of active managers underperform most of the time. Historical success does not predict…

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Oct 6, 2020

Did Australian Active Funds Outperform Benchmarks amid the COVID-19 Pandemic?

With the COVID-19 pandemic, equity markets around the world experienced massive declines with heightened volatility, and the Australian equity market was not immune. Various equity market segments experienced rapid market sell-offs followed by slow recoveries in H1 2020, with the S&P/ASX 200, S&P/ASX Mid-Small, and S&P/ASX 200 A-REIT decreasing 10.4%, 6.9%, and 21.3%, respectively. Due…

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Sep 29, 2020

SPIVA® U.S. Mid-Year 2020 Scorecard: Convergence to Underperformance

According to the SPIVA U.S. Mid-Year 2020 Scorecard, most active fund managers in the U.S. underperformed the market over the past year. Among actively managed domestic equity funds, 67% lagged the S&P Composite 1500® during the 12 months ending June 30, 2020, and the majority of active managers underperformed their benchmarks in 11 out of…

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Sep 21, 2020

Sectors and Electors

Markets expect elevated volatility surrounding the U.S. Presidential election, now just six weeks away. The VIX futures curve currently peaks in November, but as long ago as April a close observer could detect expectations of electoral volatility. Increased volatility may create an unusual opportunity for sector allocators. To understand why, we need to remember that…

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Sep 15, 2020

Courage vs. Comfort

Philosophers have long argued that courage is the most essential human virtue, because without courage, all other virtues lie in jeopardy. Remarkably, the theorizing of ethicists has an implication for practical portfolio management. We can illustrate this with a simple example in Exhibit 1. It’s Dec. 31, 1999, and a professional investor is considering buying…

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Aug 7, 2020

How Does Passive Investing Work in Uncertain Times?

Many advisors feel that their favorite active manager will guide them through market volatility and limit drawdowns during times of market stress. But is that how things played out at the beginning of 2020? S&P DJI’s Brent Kopp and Berlinda Liu take a closer look at COVID-19’s impact on active vs. passive performance.

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Jul 20, 2020

Performance Trickery, part 4

As a potential investor, would you be impressed by the pattern of fund returns summarized in Exhibit 1?  (I would be.) Exhibit 1. Portfolio and Benchmark Cumulative Returns Over the course of 15 years, the portfolio in question notched a total return of 69%, versus only 50% for its benchmark.  The accumulation of added value…

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Jul 1, 2020

Can Top-Performing Funds Stay on Top over Time?

Many market participants attempt to identify future top-performing funds using managers’ track records. This practice implicitly assumes that managers’ successful track records reflect skill and that their superior performance will be repeated in the future. Since genuine skill is likely to persist, one key measure of active management skill is the consistency of a fund’s…

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