80% of UK funds outperformed in 2020, but 10-year success rate lower

24th March 2021 14:16

Tom Bailey from interactive investor

Loading

Share on

The latest SPIVA data shows that in 2020, four in five actively managed UK equity funds outperformed.

Four out of every five actively managed UK equity funds outperformed in 2020, according to the latest S&P Indices Versus Active Funds (SPIVA) Europe Scorecard.

Published biannually, the latest data shows that four in five actively managed UK equity funds outperformed the S&P United Kingdom index in 2020. This suggests that, contrary to a lot of scepticism, UK equity fund managers were able to position themselves relatively well during last year’s volatility.

The S&P United Kingdom index is S&P Global Indices’ answer to the more popular FTSE 100 index. The S&P index is composed of 87 companies, with its constituents fairly similar to the FTSE.

Meanwhile, as you would expect, UK Small Cap funds were even more likely to outperform – just 14.8% underperformed the S&P United Kingdom SmallCap index in 2020. Small-cap stocks are less covered and researched, meaning there is supposedly more opportunity for active fund managers to take advantage of “mispricing”. However, UK Large/Mid Cap funds also did well, with 19.4% underperforming in 2020.

Over the longer term, the results for UK funds look slightly less impressive. On a 10-year basis, 65% of UK active equity funds have underperformed the S&P benchmark. The underperformance rate for both UK Small Cap and UK Large/Mid Cap rises to above 60% on a 10-year basis.

However, it is important to note that this was still much better than other sterling-denominated active funds over the same period. On a 10-year basis, 93% of Global Equity active funds have underperformed the S&P Global 1200 index. A similar number of US Equity funds underperformed the S&P 500. UK fund managers were also more likely to outperform on a 10-year basis than both emerging market equity funds (82% underperformed) and Europe ex-UK equity funds (75% underperformed).

In terms of 2020, emerging market equity funds performed the worst, with 53.7% underperforming the S&P/IFCI Composite. That was slightly more than even US Equity funds, of which 53.3% underperformed the S&P 500. This challenges the commonly held idea that emerging markets are inefficient and stocks are ‘mispriced’, making it easier to beat the index.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

Get more news and expert articles direct to your inbox

Sign up for a free research account to get the latest news and discussion, and create your own virtual portfolio.

Free Sign Up

We use cookies to ensure we give you the best experience on the website, making sure it functions well and making our communications to you relevant and useful. If you accept, you will accept all cookies on the II website. However, you can change your cookie settings at any time.