Tag Archives: SPIVA

Do Active Funds in India Benefit from Higher Active Risk Exposure?

Fund managers typically follow a factor or a style of investing and aim to construct portfolios by balancing active sector exposures and stock-selection risks within a sector. Tracking error is one way to measure a fund’s deviation from its respective benchmark to determine how “active” it is. As measured in the SPIVA® India Year-End 2018 Read more […]

2019 Mid-Year Persistence Scorecard – Key Highlights

When it comes to investing, market participants often consider past performance to be indicative of future results.  The same goes for fund selection.  Notwithstanding the evidence showing that most active managers in most regions typically underperformed their benchmarks, consistently beating peers is one way to differentiate a manager’s luck from skill.  Here are a few Read more […]

The Opportunity Cost of Active Management

Investors typically flock to active funds to pass on the stock-picking decision making to a seasoned fund manager, with the hope that the fund manager’s experience and stock-picking capabilities will enable the investor’s portfolio to grow at a faster pace than that set by the benchmark. By using this approach, investors are able to circumvent Read more […]

The Importance of Being Large-Cap

The performance of U.S. equity factors during Q2 was lackluster, with most underperforming the S&P 500, as seen in Exhibit 1.  While Minimum Volatility and Low Volatility were notable exceptions, Value, Quality, High Beta, and Momentum all lagged the benchmark – in large part because of their tilt toward smaller companies.  Since most factor indices Read more […]

Are Active Funds Better at Managing Risks? Not Really.

In investing, risk and return are two sides of the same coin; the expected returns of an asset must be accompanied by variation or uncertainty around the outcome of those returns. All else equal, higher-risk assets should be compensated, on average, by higher returns. The same philosophy applies to performance evaluation. The performance of both Read more […]

Risk-Reward Analysis of Selecting Active Managers

Although there seems to be more research on economic forecast and market analysis than manager selection, selecting investment managers is just as challenging as direct investing and requires considerable experience and expertise. In this blog, we investigate the return distribution of fixed income and equity funds to highlight the challenge of successfully selecting outperforming active Read more […]

Risk and Reward – The Advantage of Passive Investment

Passive investment is emerging as the more viable and favorable option over active investing. Recommendations for passive investing are supported by statistics. The S&P Dow Jones Indices SPIVA® Around the World Report for year-end 2018 (see Exhibit 1) highlights the trend of benchmark indices beating active funds. Exhibit 1: SPIVA Year-End 2018 Results Source: S&P Read more […]

Unreliable Investment Strategies

S&P Dow Jones Indices produces a semi-annual report comparing the performance of active managers to their target indices or benchmarks. The report is referred to as the SPIVA Scorecard (SPIVA standing for S&P Indices Versus Active Managers).  So, what does the SPIVA Scorecard tell us about performance?  As illustrated in the table above, for any regional equity class Read more […]

Buffetted Performance

Tomorrow, Warren Buffett and 30,000 of his closest friends will gather in Omaha for Berkshire Hathaway’s annual meeting.  The loyalty of long-term Berkshire shareholders is the stuff of legend, as is the investment performance that produced it.  $100 invested in Berkshire stock at the end of 1968 would have grown to more than $850,000 by Read more […]

Performance Trickery, part 2

Here is a 22-year history of a (hypothetical) actively-managed portfolio and its benchmark: Results have been decisively mediocre. The portfolio outperformed in only five years out of 22, for a hit rate of 22.7%. Its cumulative return (68.2%) lagged that of the benchmark (74.0%), and its volatility was higher (4.79% vs. 4.25%). The manager’s marketing department Read more […]