Active fund managers offer little in the way of long-term value, according to a report by Standard & Poor's, but they do seem to have a knack for netting shorter-term gains.
Only 16.7 per cent of active funds beat their benchmark over three years, and the number slips to 7.6 per cent over five years. The numbers are much better over a one-year period - with 54.6 per cent beating their index.
"Over shorter time periods we see active funds adding value, but over longer time periods, active fund outperformance is a rare observance," said Jasmit Bhandal, a director at S&P. "Investors face the hurdle of finding this extraordinary fund, and then have to hope that it will continue to repeat this performance."
For the first half of the year, only 34.5 per cent of Canadian equity funds that are actively managed outperformed the S&P/TSX composite index. However, 62 per cent of actively managed small and mid-cap funds outperformed their benchmark S&P/TSX completion index.
The annual Standard & Poor's Indices Versus Active Funds for Canada report, released Tuesday, indicated that 43.8 per cent of Canadian equity funds available five years ago are still on the market - with the majority falling to either liquidation or mergers.
Only 39.8 per cent of U.S. equity funds hung on, while 58.1 per cent of international equity and 41.3 per cent of global equity funds made it through.