The SPIVA scorecard

The Canada Mid-Year 2013 S&P Indices Versus Active Funds (SPIVA®) Scorecard was recently published. The semi-annual report tracks the performance of actively managed Canadian mutual funds, corrected for survivorship bias, and shows equal- and asset-weighted peer averages.

The active versus passive debate

I’ve written about the active versus passive debate in the passive and with this new report, the debate continues to rage on.

There is nothing novel about the index versus active debate. It has been a contentious subject for decades, and as you can see from some of the comments, there are strong opinions on both sides. The SPIVA Canada Scorecard has become a key scorekeeper of this debate.

The SPIVA scorecard results

If you want the complete report, you can download the PDF below.

2013 SPIVA Scorecard

Here’s the results of the data:

  Active funds that beat the index
Fund Category 1 year 3 year 5 year
Canadian Equity 72.73% 45.65% 30.36%
Canadian Small Cap 68.97% 42.86% 25.53%
Canadian Dividend 58.62% 3.13% 0%
US Equity 18.97% 1.45% 2.35%
International Equity 27.27% 8.11% 11.36%
Global Equity 13.19% 3.74% 8.26%

Highlights of the data

Domestic Equities:

  • Over the past 12 months ended June 30 2013, the returns of most Canadian active managers were higher than the benchmark
  • 72.73% of Canadian equity funds outperformed the S&P/TSX Composite Index
  • 68.97% of active Canadian small-/mid-cap equity funds beat the S&P/TSX Completion
  • 34.48% of active Canadian focused equity category outpaced S&P’s blended index
  • Over three- and five-year periods, only 45.65% and 30.36% of actively managed Canadian equity funds outperformed the TSX Composite Index, respectively.
  • Over the longer term, such as the five-year investment horizon, we observe the same pattern repeating across all the categories. The majority of active managers underperformed their benchmarks.

Foreign Equities:

  • Only 27.27% of international equity managers beat their benchmarks over the past 12 months ended June 30 2013
  • Only 13.19% of global equity managers had higher returns than their benchmark
  • Over the five-year period, 11.36% active international equity funds were able to beat the benchmarks and only 8.26% of active global equity funds and 2.35% of active U.S. equity funds have outpaced the indicies.

My five cents

Personally, I’ve always said investing is not about perfection but rather about probability, conviction and discipline.

When it comes to the active versus passive debate, this data reaffirms why I have become an advocate of passive investing. I think it’s great that Canadian active managers did well over this particular 1-year period but I strongly believe that performance over a 1 year period is completely random and unpredictable. Back in 2010, the SPIVA scorecard report had only 19.64% of Canadian Active Managers beating the index. In the future, there will continue to be 1 year periods where active managers win and periods when the index wins. It will be impossible in advance to predict which will win.

When it comes to performance comparisons over longer periods of time (3 years and 5 years), the data is more consistently in favour of passive investing. Again, it’s not perfection but the data suggests that there is a higher probability of winning for passive investing over longer periods.

What do you make of all this data?


  1. WealthAdviser

    I have heard the same argument(active vs. passive) for as long I have been in the financial business ( about a quarter century or so..)

    Index (passive) investors never get index returns and investors ( even the really smart ones) severely underperform their own investments.

    The problem with the passive approach is that people actively manage their own passive investments.

    Business reporters get it wrong every time. During the Financial Crisis ( The Great Panic of 2008 – 2009) the market was too low to buy. Today it seems, is too high to buy.

    Whether we call it financial amnesia or some other term, the media conveniently forgets that someone did a whole lot of selling in 2008 and 2009. As a passive investor, what advice did you get when the index was down -57% or so?

    None? Thought so…

    The truth of the matter is that investors do not get investment returns; they get investor returns.

    • Jim Yih

      Good points WealthAdvisor.

      I don’t disagree with your points but you can be a passive investor who seeks lower fees and not sell low in crisis times. Just because someone manages their own funds does not mean their investor returns are worse than those that have advisors.

      Investor psychology and behavioural economics has always played a role in investor returns. Unfortunately, I have also seen Advsior psycology play a role in investor returns where they “SELL” funds that have done the best at the wrong times too.

      For me, it’s not an either or when it comes to behavior vs fees. It’s both. Watch your behavior and watch the fees you are paying.

  2. WealthAdviser

    Hi Jim,

    I have to complement you. You have a wonderful and comprehensive site for both advisers and investors. What a tremendous resource!

    I still have to partially disagree with your viewpoint about passive vs active investing, so the debate goes on!

    As a former (reformed DIY) investor, I can tell you the temptation to outsmart yourself is a far more important factor than the DIY proponents would have you think.

    I guess I can only report on what I know about the experience of a large number of households over a number of decades but as I reach the end of my career, you will realize that investor behavior is the prime determinant for investment returns. Which is why the clients with the best investment returns aren’t the MBA’s who read the business section every morning. In looking back, my biggest regret is not realizing this far sooner. So for you young pups out there – pay attention!

    Investment behavior may not be the one and only factor, but it is far and away the most important factor.

    People generally, have great difficulty watching their own behaviors during periods of crisis and euphoria. Human nature is after all – immutable.

    And yes I completely agree; for those advisers that sold their clients out during the Financial Crisis, ( I know of none), you should be asking yourself why you are in this business as one of your primary duties is to dissuade inappropriate investor behaviors during market(and emotional) extremes.

    Watching one’s own behavior is a laudable goal but like many laudable goals, it is rarely achieved.

    • Jim Yih

      Thanks again for your comments

      I think we agree more than you think.

      I too believe that investor behaviour is the key to success. That being said, it is a separate but related issue to the passive and active debate. Here’s what I see in the industry:

      1. Many advisors and bank representatives (not all) promote investments that have good past returns which can lead to the buy high phenomenon. It’s easier to sell investments that have performed well than those that did not.

      2. Many advisors and bank representatives (not all) promote buy and hold and do very little in terms of managing a portfolio especially with mutual funds. In that case, one might consider it a form of passive investing. Why pay higher fees if there is no added value.

      3. My personal opinion is the best advisors are the ones that have defined how they add value to the client. More often than not it’s not about adding investment return but rather the planning and advice beyond just investing. It sounds like you may be one of these people. If so . . . good for you. Unfortunately for every good advisor, there’s at least one bad one.


  3. david toyne

    Hi Jim – you’ll get agreement from Steadyhand on the importance of both fees and behaviour. Its why we called the company the quirky name we did!

    Spiva compares the index with fully costed mutual funds. 2 things: many or most funds aren’t really trying to look much different than the index (they are closet indexers) and you can’t invest in the index. If Spiva compared index funds (ETFs or mutual funds) to active funds, it would get closer to the truth. But given its current structure, I think its fair to say that 100% of passive investments would not beat their benchmarks due to the fees (albeit small), trading commissions and tracking error.

    Tangerine has its passive investment product called Streetwise with a fee of 1.07% and Blackrock has just introduced a series of funds that use their iShares ETF’s, bundled together, to create portfolios. All but one of the funds have fees higher than 1.5% as they include an advice component or trailing commission for the advisor. We did a look back at performance to see how the Blackrock Balanced Portfolio would have done over 1, 3 and 5 years versus 4 no load, low fee mutual funds (60/40 asset mix) from Mawer, RBC-PHN, Leith Wheeler and Steadyhand (interesting that each firm is from the west!). Here is the result –

    The active vs passive argument is important, but it’s flawed in its focus on funds vs indices. The behavioural argument is key but given so many Canadians invest via an advisor, one has to wonder who’s behaviour is the problem.

    There are at least three ways a Canadian can invest – DIY, bank advisor/commissioned planner (MFDA channel) or direct to investor low fee fund company like those mentioned above. Media/blogger coverage on the first two is intense and understandable given the overwhelming percentage of Canadians who invest in bank owned or advisor sold fund companies (Investors Group, Mackenzie, etc). The third option is growing and will likely see more interest as the issue of cost and advisor compensation becomes more apparent and transparent to Canadians given regulatory changes coming….in 2016.

  4. Wealthadviser

    I thought your comment about one-half of all advisers being bad was not appropriate given the fair and balanced views you usually express in your articles. However, this is your web site, your content, your opinions and I have to respect that I am on your turf by invitation only.

    It is too bad we cannot continue our lively debate on behavioral economics, active vs. passive, etc. as I think you’ve pretty much locked down this thread!

    I still stand by my view that your blog site is a great resource and a cut way above the wildly variable content that is out there. I am pretty sure that you are one of the very few, exceedingly rare “good” financial journalists.

    Keep up the great writing!

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