S&P Indices Mostly Outperform Funds in 2005

According to SPIVA, the S&P MidCap 400 outperformed 76.0% of actively managed mid-cap funds, and the S&P SmallCap 600 outperformed 60.5% of actively managed small-cap funds in 2005. 

On the other hand, 55.5% of actively managed large-cap funds outperformed the S&P 500 during the year.   “Large-cap active funds benefited by being overweight in leading sectors, such as energy, real estate and utilities in 2005,” said Rosanne Pane, Mutual Fund Strategist at Standard & Poor’s, in a press release. “Large-cap funds, which could invest in large, foreign companies, were also helped by international markets which outperformed the US markets last year.”

The indices have done well over the long term also.   Over the past three years, the S&P 500 has outperformed 61.9% of large-cap funds, the S&P MidCap 400 has outperformed 70.4% of mid-cap funds, and the S&P SmallCap 600 has outperformed 71.4% of small-cap funds, according to SPIVA.   Similarly, over the past five years, the same indices have outperformed 65.4% of large-cap funds, 81.3% of mid-cap funds and 72.4% of small-cap funds. 

SPIVA methodology takes into account survivorship bias, which can significantly skew results as funds liquidate or merge.   For 2005, 6.8% of general equity funds merged or liquidated, compared to 5.2% in 2004.  Over the past three years, the merger and liquidation rate of general equity funds is 18.9%.  Over the past five years, the merger and liquidation rate of general equity funds is 27.0%.

The SPIVA scorecard can be found  here .