Half of all global, US, Europe and UK equity funds have shut over the last 10 years, illustrating the challenge active managers face when trying to beat their benchmark.
According to S&P Dow Jones Indices’ 2021 SPIVA Europe Scorecard, only 50.4% of the 1099 euro-denominated global equity funds and 50% of the 320 sterling-denominated global equity funds available in Europe in 2011 survived until 2021.
This rate was consistent in other categories too, with only 49.5% and 49.3% survivorship in the 293 euro and 133 sterling-denominated US equity funds, respectively, over the past decade.
Likewise, 53.2% of 1085 euro-denominated and 39.8% of the 93 sterling-denominated Europe equity funds saw out the decade, alongside 49.3% of sterling-denominated UK equity funds.
While stark, this rate of closures should come as little surprise when one sees only a small minority of managers have been able to consistently outperform their equivalent index in the long term.
On an absolute returns basis, a crushing 96.4% of euro-denominated and 89.7% of sterling-denominated global equity funds were beaten by the S&P Global 1200 index over the past decade.
Coming as little surprise to most, 94.9% and 94.7% of euro and sterling US equity funds were outstripped by the S&P 500 over the 10 years to the end of 2021, with this rising to 98.3% of euro-denominated US equity funds when measured on a risk-adjusted basis.
While marginally less damning, 83.2% of euro-denominated and 74.2% of sterling-denominated Europe equity funds – and 62.1% of UK equity funds – were also beaten by their respective S&P benchmarks.
Over the course of 2021 alone, European regional benchmarks enjoyed double-digit returns, with many returning over 20% during the year. The picture was also positive for fund managers, with all categories seeing returns exceeding 10%.
Andrew Innes, head of global research and design, EMEA, at S&P Dow Jones Indices, commented: “Despite the strong returns, fewer European fund managers beat the benchmark than in the prior year. In each category, there was an increase in the percentage of funds outperformed by their benchmark.
“Europe equity funds saw a 37.4% absolute increase in the percentage of funds outperformed by their benchmark from 2020 to 2021, and the volatility of the benchmark was 27.9% in 2020 and 12.3% in 2021.
“From this we can surmise that, on average, fund managers in this region may have utilised their skills better during more volatile market conditions than in a comparatively stable environment.
“However, as SPIVA frequently witnesses, any short-term success typically dissipates as the time horizon increases.”