Past performance is not an indicator of future results -- especially when it comes to active managers.
An S&P Dow Jones Indices report published Wednesday found that outperforming U.S. active mutual fund managers generally fail to sustain their success over time.
Fewer than one-in-four domestic equity managers who had beat their benchmarks as of Sept. 30, 2013, continued to outperform over the subsequent year, according to research from the SPIVA U.S. Scorecard and the Persistance Scorecard.
Out of more than 1,000 large-cap funds that existed in September 2013, just 19.7 percent outperformed the S&P 500 over the next year. In the second year, ending Sept. 30, 2015, just 15.7 percent outperformed the benchmark.
By the close of the third year of the study on Sept. 30, 2016, not one of the large-cap domestic funds outperformed the S&P 500.
According to S&P Dow Jones Indices, the results were persistent across styles and geographies: among small-, mid- and large-cap funds, among value, growth and core, no fund outperformed the S&P 500 over the three-year study period.
Only 5.8 percent of international funds outperformed their benchmarks on a consecutive basis over the three-year period.
According to the report, real estate and international equity managers tended to perform better, with international small-cap equity mangers posting a 9 percent 3-year persistence level.
Funds tended to report better performance when a rolling quarterly average was considered versus point-in-time annual returns, especially across the first year, according to the report, but the longer the time horizon, the less persistent a fund’s ability to outperform tended to become.
For the research, S&P Dow Jones Indicies analyzed data from the University of Chicago’s Center for Research and Security Prices Survivorship-Bias-Free U.S. Mutual Fund Database on over 2,300 active eq