Most Aus funds underperforming benchmarks

 — 1 minute read

The majority of active funds had worse performances than their respective benchmark indices in the first half of the year, according to the S&P Dow Jones Indices, with A-REIT funds being the exception.

S&P Dow Jones Indices has reported back on fund performance in its newly published SPIVA Australia Scorecard for the first six months of 2020.

Market sell-offs were seen in different Australian equity market segments in the first half due to the COVID pandemic, while Australian bonds recorded a small gain – but the majority of funds in the bonds category failed to outperform their benchmark. 


The S&P/ASX 200 lost 10.42 per cent in the first half of the year, while Australian equity general funds recorded worse drawdowns of 11.66 per cent and 11.39 per cent in equal- and asset-weighted bases respectively. 

During the six and 12-month periods ending in June, respectively 64.1 per cent and 57.1 per cent of funds in the Australian equity general fund category fell short of the benchmark. During the 10 and 15-year horizons, less than 20 per cent of the funds managed to survive and deliver higher returns than the benchmark.

In Australian equity mid- and small-cap funds, the S&P/ASX Mid-Small benchmark dropped 6.86 per cent in the first half, while the funds recorded a larger loss. During the six and 12-month periods ending in June, 55.6 per cent and 49.61 respectively underperformed the benchmark.

The international equity market suffered a smaller loss than the local equity market, with the S&P Developed Ex-Australia LargeMidCap index posting a 3.2 per cent loss, while international equity general funds marked an equal-weighted average return of -3.9 per cent, with 60.4 per cent of fund underperforming the benchmark.

Over the 10 and 15-year periods, more than 90 per cent of funds underperformed the S&P Developed Ex-Australia LargeMidCap mark. 

Looking at Australian bonds, the S&P/ASX Australian Fixed Interest 0+ Index recorded a gain of 3.59 per cent in the first half, while Australian bonds funds recorded smaller gains of 2.94 per cent and 2.87 per cent on equal- and asset-weighted bases respectively. Over the six and 12-month periods, 73.1 per cent and 68.1 per cent underperformed the benchmark.

While the S&P/ASX200 A-REIT copped a severe loss of 21.29 per cent in the first half, the Australian funds in the A-REIT category lost 22 per cent and 22.21 per cent on equal and asset-weighted bases respectively. For the six and 12-month periods, less than half (44.78 per cent) of funds underperformed, but a higher portion of funds failed to beat the benchmark over longer periods.

Despite the COVID crisis, the report noted there were not higher fund liquidation rates across all fund categories in the year ending June 2020, compared with previous scorecards. 

Only 2.76 per cent of Australian funds measured were merged or liquidated, with Australian bond funds recording the highest liquidation rate of 4.3 per cent. In contrast, only 1.49 per cent of Australian Equity A-REIT funds failed to survive. 

Over longer timeframes, 78.8 per cent, 63.1 per cent and 51.8 per cent of funds survived the five, 10 and 15-year periods respectively.

Priscilla Luk, head of global index research and design, APAC at S&P Dow Jones Indices commented: “Return spreads across the S&P/ASX 200 sector indices and S&P/ASX 200 factor indices were widened to 45.5 per cent and 26.8 per cent respectively in 1H 2020.”

“The stock return dispersion in global equity indices rocketed to historic highs during this volatile period, providing a fertile ground for stock picking. However, data shows that the majority of active fund managers failed to capture this opportunity.”


Most Aus funds underperforming benchmarks
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Sarah Simpkins

Sarah Simpkins

Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth. 

Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio. 

You can contact her on [email protected].


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