News

Only 8.2 per cent of Canadian equity fund managers outperformed their market benchmarks in the first quarter as actively managed portfolios continued to lag the indexes, Standard & Poor's said Tuesday.

The managers' shortfall came during a quarter when the S&P/TSX composite index started at 13,883, tumbled as low as 12,132 with a 605-point single-day drop on Jan. 21, then ended March at 13,350, off 3.8 per cent on the period.

Mutual fund managers tend to claim that their expertise can limit losses in falling markets, but “even during turbulent market conditions we continue to see the majority of active fund managers underperforming their relative S&P style benchmark,” said Jasmit Bhandal, a director at Standard & Poor's.

“In addition ... results continue to show that active fund managers lag their passive counterparts on a one-, three- and five-year period.”

Standard & Poor's said active managers in the Canadian focused equity category fared better, with almost half — 46.3 per cent — beating a blended index benchmark.

In the Canadian small- and mid-capitalization stock category, only 24.1 per cent outpaced the index.

According to the S&P tally, the 12-month return on the S&P/TSX composite index beat the weighted average of the managers whose portfolios are benchmarked to it by 5.2 per cent, while the smaller-company index's outperformance was 2.3 per cent.

Among S&P-managed foreign equity benchmarks, the international index beat the average active manager's 12-month return by 2.8 per cent, while the U.S. Standard & Poor's 500 index had a 1.4 per cent advantage.