One in ten active European equity funds beats benchmark over a year

On the 10/08/19 at 12:05PM


Adrien Paredes-Vanheule

S&P Dow Jones' SPIVA Europe scorecard stresses sharpest underperformances in the area of French and Spanish equities.

S&P Dow Jones's SPIVA Europe scorecard found out that 90.23% of the active European equity funds denominated in euros failed to outperform the S&P Europe 350 over the year to 30 June 2019. The figure drops to 82.63% over a three-year period and to 77.53% over a five-year period. S&P Dow Jones' analysis over ten years shows 88.15% of the euro-denominated active European equity funds did not beat the S&P Europe 350. Also strategies replicating the index yielded better than the active strategies over one, three, five and ten years. In the year to 30 June 2019, euro-denominated active European equity funds' asset-weighted returns were negative (-1.31%) while the S&P Europe 350 benchmark was up 5.3%. 

Active eurozone-focused equity funds performed slightly better against the S&P Eurozone BMI index than their pan-European peers. But still, in the year to 30 June 2019, 72.61% of them underperformed the benchmark and delivered negative returns of -1.77% when the S&P Eurozone BMI gained 1.95% over the same period.

At country level, S&P Dow Jones specified that the S&P Germany BMI index was the only benchmark - within the euro-denominated fund categories - ending in negative yield territory over the one-year period to 30 June 2019 (-1.2%). Though S&P Dow Jones said active funds investing in Germany were "largely unable to outmaneuver the downtrend" as they returned -4.4% on an asset-weighted basis over the same period. Also, 83.16% of the German equity funds failed to outperform the S&P German BMI over a year.

The sharpest underperformances were stressed in the area of French and Spanish equities. 96.38% of the active French equity funds were unable to beat the S&P France BMI index over the year to 30 June 2019. Besides, they returned -6.09% on an asset-weighted basis while the index was up 6.17% over that period. As for Spanish equity funds, which yielded negatively over a year (-7.51% vs. + 0.88% for the S&P Spain BMI), none of them outperformed S&P's Spanish index over the period.

Neither did the active Dutch equity funds better than their Spanish counterparts as they too failed as a whole to outperform the S&P Netherlands BMI in the year to 30 June 2019. Returns of Dutch active equity funds were below these of the benchmark (3.50% against 8.56% over one year). Regarding Italy, 81.03% of active Italian equity funds failed to outperform the S&P Italy in the year to 30 June 2019. Their returns stood in negative territory over the year at -2.6% in comparison with the 0.64% rise in returns of the benchmark.

UK managers have had better returns than indices since Brexit vote

In the United Kingdom, local large and mid-cap managers did not beat their respective S&P's UK equity indices neither in the year to 30 June 2019 nor on the three-year period to 30 June 2019 - since the Brexit referendum held on 23 June 2016. However, in asset-weighted returns terms, all UK caps, large and mid-cap and small-cap managers outperformed their respective indices.

"In the three-year period from mid 2016, UK small-cap equity funds outperformed the S&P United Kingdom SmallCap by 3.4% per year on an asset-weighted basis. The past year, however, marked a stark reversal, with the same category underperforming the benchmark by 3.7% on the same basis. Over the three-year period, 70% of UK small-cap funds outperformed their benchmark, which was the highest rate among all fund categories.  Other active UK equity categories also fared well over the period", S&P Dow Jones noted.

"Over the more recent one-year period, fund managers were largely unable to capitalize on the looming Brexit uncertainty, with 80% of all UK-focused funds underperforming their benchmarks", it added.

S&P Dow Jones Spiva Europe Scorecard


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