Out of the nine equity investment style boxes, active fund managers outperformed indices in five, with mid-cap blend coming in at a tie for the year. Likewise, active fund managers dominated sector fund returns, beating indices in seven out of eight sectors in 2003, with utilities funds being the sole exception, according to the year-end 2003 returns of the Standard & Poor’s Indices Versus Active Funds Scorecard (SPIVA).
“Performance in 2003 was dominated by returns in growth segments such as technology (+47%) and consumer discretionary (+37%),” Rosanne Pane, Mutual Fund Strategist at Standard & Poor’s said in a news release “Active fund managers who were overweight in these sectors outperformed their benchmarks.”
Across capitalizations, 55.3% of large-cap growth funds, 68.3% of mid-cap growth funds and 64.8% of small-cap growth funds outperforming the S&P/BARRA Growth Index in 2003. However, the S&P 500 beat 64.6% of large-cap funds while the S&P MidCap 400 outpaced 56.4% of mid-cap funds. Small-cap active funds turned in an impressive year, with 61.2% beating the S&P SmallCap 600 Index.
S&P is quick to point out that while actively managed mutual funds may have had the upper hand this year, over the long run, it is indices that generally perform better. “Standard & Poor’s continues to see active funds underperforming indices over longer time horizons such as three and five years,” Srikant Dash, Index Strategist at Standard & Poor’s said in the release. “This pattern is noticeable across large-, mid-, and small-cap categories, and has held across the diverse market environments of the past few years.”
In fact, over the past five years, the S&P 500 has outperformed 53.2% of large-cap funds, the S&P MidCap 400 has outperformed 81.7% of mid-cap funds, and the S&P SmallCap 600 has outperformed 69.8% of small-cap funds.
Similarly, over the past three years, the S&P 500 has outperformed 63.7% of large-cap funds, the S&P MidCap 400 has outperformed 73.3% of mid-cap funds, and the S&P SmallCap 600 has outperformed 68.6% of small-cap funds.
The complete year-end 2003 SPIVA Scorecard is available to the public at www.standardandpoors.com/spiva.