#spiva

[newstech24]

SPIVA Mid-Yr 2025 Outcomes Round The World

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SPIVA Mid-Yr 2025 Outcomes Round The World

[frankluengo]

Passive investing wins again

I want to keep things light today and bring up a recent scorecard published by S&P Dow Jones Indices which compares actively managed funds against indices. You can read some highlights here, or download the report here.

The scorecard, called SPIVA, aims to directly tackle the contentious debate of whether actively managed funds are better for you than an index. For Canadian funds, the answer is an unequivocal no.

Some of the key highlights of the report show that Canadian equity fund managers only had a 1 in 5 chance of beating the S&P/TSX composite, after fees. The results were slightly better at roughly 1 in 3 chances for the last 3 years.

This sounds to me like dead money.

I did wonder while reading the article about funds that don't try to beat the index at all. After all there are energy funds, dividend funds, and reduced risk funds that are partly hedged against market downturns.

The SPIVA scorecard does go to some lengths to rectify this, as it doesn't compare every fund against the same benchmark. Rather it picks the closest index to the fund to compare apples to apples. This makes the scorecard that much more meaningful.

Furthermore, if you do have a fund that is supposed to lower your investment risk over the short to medium term, take a look at how that fund performed during the last two major market downturns. The article in the Globe that covers this scorecard suggests that those "safer" funds do just as poorly as the market in a downturn.

You can make your own mind about this, but this is strong data to consider.

On a related note, I would suggest you take a look at some fundamental funds based on Research Affiliates Fundamental Indexing, which seem to be a better passive investing tool than traditional cap weighted index ETFs. A few out there are Powershares PRF, PXH, and PDN as well as Charles Scwab's FNDB, FNDX, and FNDA ETFs.