S&P: Indices, Active Equity Even In Q2

July 9, 2003 (PLANSPONSOR.com) - Actively managed equity mutual funds and their corresponding Standard & Poor's indices rounded the final turn in the second quarter of 2003 in a dead heat, with Standard & Poor's declaring a draw for the quarter.

The debate over indices and active funds remained up for grab in the second quarter, with indices nosing slightly ahead in the large- and mid-cap segments, while fading against small-cap active funds.   Overall, 56.2% of large cap and 56.6% of mid-cap active funds lost to the S&P 500 and S&P MidCap 400, yet the small-cap active funds came out ahead of their benchmarks, with 59.6% besting the S&P SmallCap 600, according to the fourth quarterly release of the Standard and Poor’s Indices Versus Active Funds Scorecard (SPIVA)

Among growth categories, actively managed large-, mid-, and small-cap growth funds turned in a notable second quarter, outperforming their relevant indices by 70.7%, 64.7%, and 81.3% respectively.  However, the reverse was true for value funds. 

Looking at sector funds, active managers beat indices in five out of eight sectors in the last quarter.  This is also true for the five-year horizon as well, suggesting that active sector fund managers have added value respective to their sector benchmarks.   In general, REITs and Utilities are sectors in which active managers had the most trouble beating indices over different time horizons.

However, over the last five years, indices have fared better than active equity funds, with the S&P 500 having beaten 56.8% of large cap funds, the S&P SmallCap 600 better than 66.1% of small-cap funds and the S&P MidCap 400 besting 92.7% of mid-cap funds. Similarly, for the three-year term, 56.3% of large-cap funds, 72.8% of mid-cap funds, and 70.4% of small-cap funds fared worse than their benchmark.

Last quarter, active equity funds turned in a better performance than their index counterparts (See  S&P to Track Index, Active Sector Funds ).   The complete second quarter SPIVA Scorecard is available at  www.standardandpoors.com .