Half of Large Cap Equity Funds Lag S&P Indices

November 12, 2002 (PLANSPONSOR.com) - Six out of 10 large-cap equity mutual funds couldn't beat the Standard & Poor's (S&P) 500 benchmark over the past five years, according to a new fourth-quarter S&P report.

When the stock market tanked, however, just over half (54%) of actively managed large-cap stock funds beat out the index over the last three years, S&P said, in its newly launched Standard & Poor’s Indices Versus Active Funds Scorecard (SPIVA).

Funds in the mid-cap range had the most difficulty beating the index benchmark, the S&P MidCap 400, with only 7% showing better returns for the five-year period.

Also significant was the finding that actively managed small-cap funds did not tend to outperform the index benchmark, S&P said.

Measured against the S&P SmallCap 600, 67% of actively-managed small-cap funds on the five-year period and 71% over three years underperformed the index.

The SPIVA methodology is designed to provide an accurate and objective comparison of funds’ performance versus their appropriate style indices, correcting for factors that have skewed results in previous index-versus-active analyses in the industry.  

The SPIVA scorecard reveals quarterly performance data for domestic equity mutual funds benchmarked against the corresponding S&P indices, including the S&P 500 for large-cap funds, the S&P MidCap 400 for mid-cap, the S&P SmallCap 600 for small-cap, and the S&P SuperComposite 1500 for broad market comparisons. The S&P/BARRA growth and value indices are used for specific style categories.

Standard & Poor’s US indices are compared to 1,967 actively-managed equity funds on a quarterly basis, and the five-year data tracks 1,431 funds.

The complete fourth quarter SPIVA Scorecard is available   from S&P .