Mutual funds

Equity mutual funds lose the challenge to S&P 500 index funds

Posted by MoneyController on 20.05.2024

Some data from the US indicate that a large proportion of active mutual funds are failing to keep up with the performance of ETFs indexed to the S&P 500.

SPIVA's results (S&P Indexed Vs. Active)

Active funds are finding it increasingly difficult to beat passive funds, the ETFs. In ‘La Stampa’, Glauco Maggi reported the data of the SPIVA (S&P Indexed Vs. Assets) analysis. The result is that in 2023 only 40 per cent of active US equity funds managed to beat funds indexed to the S&P500 market index. The result is rather in line with the historical average: data from the last twenty-three years (maximum span of SPIVA's measurements) show that only 37% of funds beat the market index.

Active funds: results in the areas of small caps and bonds

Again in ‘La Stampa’, Maggi analyses SPIVA's data a little more closely: as far as active management is concerned, it was the equity funds investing in small caps that achieved an above-average result; among the worst performers were the active bond funds, which did worse than the benchmark index in 80 per cent of cases in the case of high-yield bonds and 98 per cent in the case of investment grade bonds. The result tends to be better even if the investment time horizons are extended.

Two advantages of ETFs

As Maggi writes, at the beginning of this year, the volume of assets under management through passive funds in the US surpassed those managed by active funds. This is a historic achievement and one that, Maggi writes, could happen sooner or later outside the US market as well: although active funds do not enjoy the flexibility of active funds, nor the management of teams of professionals, Maggi concludes, active funds are weighed down by the increasingly difficult comparison with market performance and management costs, two points that are to the advantage of ETFs.

Read also:

What are ETFs and how do they work?

Mutual funds – what are they?

What are the main management styles with regard to the benchmark?

TODAY’S MOST READ ARTICLES

MOST READ ARTICLES OF THE WEEK

18.06.2024 posted by MoneyController

Focus China: from Warren Buffett's moves on the property market to the hunger for offshore investment

Continue reading

MOST READ ARTICLES OF THE MONTH

MOST READ ARTICLES IN THE FINANCIAL FORUM

View classification