S&P research ranks active management results against peers
Canadian investment fund managers faced multiple challenges in 2023 which saw them slip from their top-tier performance of four years earlier.
The latest S&P Persistence Scorecard, which measures consistency of funds’ performance relative to their peers, found that across all seven fund categories, none of the managers who were in the top quartile for the 12-month period ending December 2019 managed to remain there for the next four years.
Looking at the funds that remained in the top half for two consecutive five-year periods, only three of the seven categories examined saw percentages above what would be expected in a random distribution. These were U.S. equity, global equity, and Canadian dividend & income equity. The other categories in the analysis were Canadian small/mid-cap equity, Canadian equity, Canadian focused equity, and international equity.
The report found that 85% of Canadian active managers underperformed the S&P/TSX Composite Index in 2023.
It revealed that:
- None of the top-quartile Canadian Focused Equity, Canadian Small-/Mid-Cap Equity, International Equity, and U.S. Equity funds maintained their position in the top quartile for the subsequent two years, compared to an expected 6.25% based on random chance.
- 14% of Canadian Equity funds remained in the top quartile over two consecutive five-year periods, below the 25% that would be expected under a random distribution
- Over two consecutive five-year periods, a weighted average of 13% of all the top half active equity funds across categories were merged or liquidated.
Funds also struggled to maintain alpha with an average of just 4.4% of the funds across the categories that outperformed their benchmarks in 2021 doing so across the following two years.
