SPIVA Australia Year-End 2020

SUMMARY

• S&P Dow Jones Indices has been the de facto scorekeeper of the ongoing active versus passive debate since the first publication of the SPIVA® U.S. Scorecard in 2002. Over the years, we have built on our 18 years of experience publishing the report by expanding scorecard coverage into Australia, Canada, Europe, India, Japan, Latin America, and South Africa.
• The SPIVA Australia Scorecard reports on the performance of Australian active funds against their respective benchmark indices over different time periods. In this scorecard, we evaluated returns of over 897 Australian equity funds (large, mid, and small cap, as well as A-REIT), 475 international equity funds, and 112 Australian bond funds.
• Strong recovery was seen in equity markets after sell-offs in February and March 2020. Apart from Australian A-REIT funds, the majority of active funds across various equity fund categories, Australian Equity General, Australian Equity Mid- and Small-Cap, and International Equity General, outperformed their respective benchmarks in the second half of 2020.
• Average Australian Bond funds started outperforming the benchmark since April 2020. In the second half of 2020, more than 80% of Australian Bond funds beat the S&P/ASX Australian Fixed Interest 0+ Index with an equal-weighted average excess return of 0.7%.
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• Australian Equity General Funds: The S&P/ASX 200 gained 13.2% in the second half of 2020, while Australian Equity General funds enjoyed higher returns of 14.6% and 15.0% on equal- and asset-weighted bases, respectively. Over the 6- and 12-month periods ending December 2020, only 39.3% and 55.6% of funds were beaten by the benchmark, respectively, which were much lower than the observations over the 3- and 5-year horizons.  However, over 7% of funds in this category were liquidated in 2020.
• Australian Equity Mid- and Small-Cap Funds: The S&P/ASX Mid-Small had a strong return of 21.7% in the second half of 2020, while the Australian Equity Mid- and Small-Cap funds recorded bigger gains. Funds with smaller assets tended to suffer more losses during the first half of 2020, but they tended to perform better during the recovery in the second half, with the equal-weighted returns exceeding the asset-weighted return by more than 1%.  Over the 6- and 12-month periods ending December 2020, 34.1% and 53.0% of funds failed to outperform the benchmark, respectively.
• International Equity General Funds: The international equity market recorded smaller gains than the Australian equity market in the second half of 2020. The S&P Developed Ex-Australia LargeMidCap marked a return of 10.2% and more than half of the International Equity General funds outperformed the benchmark over this period.  Over the 6- and 12-month periods, the equal-weighted returns exceeded the asset-weighted returns by 1.7% and 2.3%, respectively, indicating funds with smaller assets tended to perform better than their peers with larger assets in the past year.
• Australian Bond Funds: The S&P/ASX Australian Fixed Interest 0+ Index recorded a narrow gain of 0.9% in the second half of 2020, though the Australian Bond funds recorded higher returns of 1.6% and 1.8% on equal- and asset-weighted bases, respectively. Over the 6- and 12-month periods ending December 2020, only 16.7% and 39.4% of funds underperformed the benchmark in this category, which was the most favorable among active funds across all SPIVA fund categories.
• Australian Equity A-REIT Funds: The S&P/ASX 200 A-REIT gained 21.2% in the second half of 2020, though more than half of the Australian Equity A-REIT funds underperformed the benchmark, recording slightly smaller returns of 20.7% and 20.4% on equal- and asset-weighted bases, respectively. In 2020, 54.5% of funds in this category did not outperform the benchmark and the equal- and asset-weighted average returns lagged the benchmark return by 1.3% and 1.7%, respectively.
• Fund Survivorship: In 2020, the overall fund liquidation rate across all categories was 6.1%, which was higher than the rate of 3.5% in 2019. The highest liquidation rates were seen in the Australian Equity General and Australian Equity A-REIT fund categories.  In 2020, 7.1% of Australian Equity General funds were liquidated, compared with 1.8% in 2019.  The liquidation rate of Australian Equity A-REIT funds was 7.6% in 2020, much higher than the rate of 2.9% recorded in 2019.