Commenting on the latest SPIVA Australia Scorecard, Global X said it is well-documented that most active funds underperform broad market indices such as the S&P/ASX 200 over the long term.
This has coincided with the latest SPIVA Report for the Australian market showing that anywhere from 75 per cent to 95 per cent of equity funds fail to beat the broad market benchmark over a 10-year period.
“However, Global X’s latest research suggests investors may be setting the bar too low when evaluating fund performance in terms of benchmark appropriateness.”
S&P Global Indices’ new report highlighted that many active domestic equity funds struggled to keep pace with the market, while global equity and A-REIT funds fared better, demonstrating one of their lowest rates of underperformance in recent years.
The first half of 2025 delivered mixed outcomes for active managers in Australia, according to the SPIVA Australia Scorecard.
Many active domestic equity funds again lagged the market, but global equity and A-REIT funds saw some of their strongest relative results in years.
Global X said that when comparing more than 900 Australian large-cap and global equity funds to the S&P/ASX 200 GARP Index and the S&P World ex-Australia GARP Index, fewer than 1 per cent of funds outperformed their respective GARP benchmarks over a 10-year period – a result consistent across both Australian and global categories.
“Many active funds tilt toward factors like growth, quality or value, so comparing them to a plain-vanilla broad index doesn’t tell the full story,” Senior product and investment strategist Marc Jocum said.
“When you test them against a benchmark that actually reflects their style, the performance gap widens dramatically.”
Meanwhile, S&P Dow Jones Indices said active bond funds’ first-half performance placed them on track to achieve a third consecutive year of majority outperformance.
“In every category, however, a firm majority of funds underperformed over the decade ending in June 2025,” the report said.
S&P Dow Jones Indices noted that one of the most significant trends in the first half of the year was the underperformance of US equities, alongside a depreciation in the US dollar.
“Active global equity managers who maintained an underweight position in the US should have performed well, as the S&P World Ex-US Index outperformed the S&P World Index by 8.7 per cent in H1 2025 in Australian dollar terms.”
Active managers also benefited from greater opportunities for stock-level selection.
“The US accounted for over 70 per cent of the S&P World Index by index weight at the year’s starting point, but less than 70 per cent by count; the U.S. stocks’ relatively poor performance enabled a larger number of non-U.S. stocks to outperform the index. In fact, an unusually high 57 per cent of constituents in the S&P World Index outperformed the index, a stark contrast from 2024 in which only 28 per cent of constituents did so,” the report said.
In contrast, the return distribution of Australian stocks remained typical, with less than half (47 per cent) of S&P/ASX 200 constituents outperforming, creating a less favourable environment for stock picking.
The SPIVA Australia Scorecard measures the performance of actively managed funds relative to benchmarks across multiple time horizons, spanning equity, real estate and bond funds, while also reporting outperformance rates, survivorship rates and performance dispersion.
S&P Dow Jones Indices added that despite ongoing trade tensions and geopolitical challenges, global equities delivered a strong rebound in the second quarter of 2025.
“The S&P World Index posted a robust 10 per cent gain in US dollar terms to finish the first half of the year at an all-time high, although its return in Australian dollars was substantially lower at 4 per cent. The S&P/ASX 200 reached all-time highs in June but closed just shy of them, finishing with a healthy 6.4 per cent return for H1 2025. Stocks of all size cohorts gained similarly overall, with the S&P/ASX 50, S&P/ASX MidCap 50 and S&P/ASX Small Ordinaries all recording returns of 6-7 per cent. Meanwhile, the broad-based S&P/ASX iBoxx Australian Fixed Interest 0+ Index rose by 4 per cent, helped by gradually declining interest rates and contained credit spreads.”
Global Equity General Funds
Global equities saw significant shifts in H1 2025, driven by U.S. equities lagging other markets and a sharp weakening of the U.S. dollar. In the Global Equity General category – the largest by number of funds – 54 per cent of active managers underperformed, well below the long-term average of 71 per cent. Over longer periods, underperformance increased to 89 per cent, 94 per cent and 96 per cent across the 5, 10 and 15-year horizons.
Australian Equity General Funds
The S&P/ASX 200 rose 6.4 per cent in H1 2025, while actively managed Australian Equity General funds returned an asset-weighted average of 4.5 per cent. Over the period, 71 per cent of funds underperformed, above the long-term average of 59 per cent. Over 15 years, 85 per cent of funds failed to outperform the benchmark.
Australian Equity Mid- and Small-Cap Funds
The S&P/ASX Mid-Small Index gained 6.8 per cent, while actively managed Mid- and Small-Cap funds delivered an asset-weighted average return of 4.1 per cent. During this period, 63 per cent of funds underperformed. This category continues to have the lowest long-term underperformance, with only 58 per cent lagging over the past 15 years.
Australian Bonds Funds
The S&P/ASX iBoxx Australian Fixed Interest 0+ Index rose 4.0 per cent, while actively managed bond funds posted a similar 3.9 per cent asset-weighted return. The share of managers underperforming increased to 46 per cent in H1 2025, up from 30 per cent in 2024 and 26 per cent in 2023. Over longer horizons, underperformance reached 67 per cent over 10 years and 76 per cent over 15 years.
Australian Equity A-REIT Funds
In H1 2025, half of actively managed funds in the A-REIT category underperformed the S&P/ASX 200 A-REIT Index. The benchmark gained 6.0 per cent, while the category’s asset-weighted average return reached 7.1 per cent. Over 15 years, 85 per cent of funds failed to outperform.
Fund Survivorship
Liquidation rates remained stable across categories, averaging 2 per cent in H1 2025. In the A-REIT segment, closures steadied after a volatile 2024, when 9 of 51 funds – around 18 per cent – failed to survive. Over 15 years, however, attrition increased significantly, with 52 per cent of funds merged or liquidated across all categories.
S&P Global Indices said equity markets offered promising conditions for active managers in early 2025, supported by elevated dispersion among S&P World Index constituents. Sector-level dispersion accounted for roughly 45 per cent of total stock-level dispersion, above the 10-year average of 37 per cent.
“This increase was partially driven by the US’s new tariff policies, which targeted specific industries, alongside responses from the US’s major trading partners. This environment could have allowed agile and skillful active managers to capitalize on sectors moving differently from one another.”
By contrast, Australian equity sectors exhibited lower dispersion, both in absolute and relative terms. In H1 2025, the return spread between the best- and worst-performing S&P/ASX 200 sectors was just 22.5 per cent, led by Communication Services and Health Care.
“This is on track to be the narrowest return differential in the past 10 years, indicating fewer opportunities for active sector selection in the first half of the year.”
Meanwhile, bond managers are facing increasingly challenging conditions this year, S&P Global Indices said.
“In 2024, inverted yield curves allowed for the harvesting of higher yields with less duration risk, while narrowing credit spreads typically rewarded the assumption of greater credit risk. However, the yield curve has since reverted to become largely upward-sloping, and credit spreads failed to tighten further from their already narrow levels. These trends together meant that bond managers might have to work harder or change gears to achieve outperformance in 2025.”
