The turtle continues to win

A decade ago Standard & Poor created the SPIVA score card to “bring to the corporate world some of the averaging schemes, appropriate benchmark comparisons and techniques for measuring survivorship that had been long embraced by finance professors.” To their surprise it’s been a smashing success and is now widely followed by the investment and academic community. Although I can’t say I’m surprised at some of the observations in this year’s report, there are many investors who will be. Here’s a few of the more important observations:

  • There is a common perception that the large-cap market is efficient and should be indexed while the small-cap market is inefficient and should be active. This principle has stood the test of time; indexing continues to be much more deeply entrenched in the U.S. large-cap market than the U.S. small-cap market. However, over the last decade, SPIVA has consistently shown that indexing works as well for U.S. small-caps as it does for U.S. large-caps.
  • Bear markets should generally favor active managers. Instead of being 100% invested in a market that is turning south, active managers would have the opportunity to move to cash, or seek more defensive positions. Unfortunately, that opportunity does not often translate to reality. In the two true bear markets the SPIVA Scorecard has tracked over the last decade, most active equity managers failed to beat their benchmarks.

You can find the full report at:

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