Canadian active managers struggled in 2017: SPIVA

Yield-focused active strategies did well last year

The majority of active managers failed to outperform their respective benchmarks in 2017, with the exception of Canada dividend and income equity funds, according to the 2107 year-end S&P Indices Versus Active Funds (SPIVA) Canada Scorecard.

Specifically, although broad market indices had a slow start in the first six months of the year, the indices posted high single-digit gains in 2017, with the S&P/TSX Composite and the S&P/TSX 60 returning 9.10% and 9.78%, respectively. The majority of the returns occurred in the second half of the year.

The bulk of active managers investing in domestic equity underperformed the benchmark, with only 6.78% of Canadian equity funds outperforming the S&P/TSX composite over the one-year period, according to the report.

However, yield-focused active strategies did well in 2017. Within the Canadian dividend and income equity category, 57.89% of funds outperformed their respective benchmarks over the one-year period. That said, over the 10-year period, no funds were able to outpace the S&P/TSX Canadian dividend aristocrats.

The one-year data also demonstrated unfavourable results for actively managed funds in the Canadian small-/mid-cap dquity category. Managers were not able to keep pace with the 7.05% return of the S&P/TSX completion index, which resulted in only 6.45% of managers outperforming the benchmark. Furthermore, on an asset-weighted basis, these funds had a one-year return of 2.40%, which represents a 4.64% shortfall from the index.

Over the same period, Canadian focused equity managers continued to be among the worst performers. Only 4.84% managed to outperform the blended index, which allocates 50% of its weight to the S&P/TSX composite, 25% of its weight to the S&P 500, and 25% of its weight to the S&P EPAC large-midcap index.

Over the long-term, the results were unambiguous across all domestic equity categories. The data for the five-year period showed the losing pattern repeating across all categories, as the majority of active managers underperformed their respective benchmarks.

The 10-year period showed further struggles for active managers, the report says, with less than one-quarter of funds outperforming.