S&P passive funds trumped active over past five years

'The belief that bear markets strongly favor active management is a myth,' analyst says

Apr 20, 2009 @ 3:44 pm

By Sue Asci

Passively managed funds outperformed actively managed funds across all categories during the past five years according to Standard & Poor’s Index Services, which was released today.

Between 2004 and 2008, the S&P 500 stock index outperformed 71.09% of actively managed large-cap funds, according to the year-end 2008 report from the New York-based research firm.

In addition, the S&P MidCap 400 Index outperformed 75.9% of mid-cap funds and the S&P SmallCap 600 Index outperformed 85.5% of small-cap funds.

“The belief that bear markets strongly favor active management is a myth,” Srikant Dash, global head of research and design at Standard & Poor’s, said in a statement. “The bear market of 2000 to 2002 showed similar outcomes.”

Similar results were also reported for international-equity and fixed-income funds.

Among international-equity funds, the indexes outperformed a majority of actively managed non-U.S. equity funds.

For fixed income, the relative shortfall from the five-year benchmark ranged between 2% and 3% a year for municipal bond funds and 1% to 5% a year for investment grade bond funds, Standard & Poor’s reported.


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