The latest SPIVA Australia Scorecard, which measures active fund managers against their relevant benchmarks, found that more than 85 per cent of international equity and Australian bond funds in the domestic market underperformed in the past decade.
Seventy per cent of Australian general equity and A-REIT funds failed to beat their benchmarks in the 10 years to 30 June 2017, said S&P.
The SPIVA report corrects for a phenomenon in active funds management called ‘survivorship bias’. The bias alludes to the fact that active management performance tends to be overestimated because only the fund managers that remain in business are included in the results.
“Unlike other commonly available comparison reports, SPIVA scorecards account for the entire opportunity set – not just the survivors – thereby eliminating survivorship bias,” said the report.
S&P found that over the past 10 years, international equity funds domiciled in Australia had the lowest survival rate, with only 52.8 remaining as going concerns.
Mid- and small-cap funds had the highest survival rate at 71.3 per cent. Australian mid- and small-cap funds were also the most likely to outperform their relevant benchmarks, with only 37 per cent underperforming.
Over the past 12 months, said S&P, 6.1 per cent of Australian managed funds from all categories were either merged or liquidated.
“International equity funds disappeared at the fastest rate [over the past year], while Australian bond funds had the highest survival rate,” said the report.
