The SPIVA U.S. Mid-Year 2019 Scorecard was published recently. The report shows that the strong rally in the domestic equities market in the first half of 2019 did not necessarily translate into success for active managers.

Active managers’ performance relative to the benchmark indices showed significant discrepancies in different market segments. For the one-year period ending in June 2019, 71% of domestic equity funds underperformed the S&P Composite 1500®, slightly more than the SPIVA U.S. Year-End 2018 report’s 69%. The majority of large-cap funds lagged their benchmarks, while mid-cap and small-cap active funds performed relatively better.

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The outsized success of the mid- and small-cap funds may be explained by the performance divergence of the benchmarks. For the 12-month period ending in June 2019, the S&P 500® was up 10.4% and the S&P MidCap 400® gained a modest 1.4%, while the S&P SmallCap 600® fell 4.9%. Active managers in the two smaller-cap categories may have sized up into larger-cap securities in order to boost returns.

Performance discrepancy was even more prominent for growth managers. While most domestic large-cap growth managers were unable to keep up with the performance of the S&P 500 Growth (up 12%), more than 80% of mid- and small-cap growth managers beat their benchmarks for the one-year period ending in June 2019. Exhibit 2 shows that these two categories underperformed relative to large-cap growth.

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The majority of fixed income active funds underperformed their benchmarks over the studied period, with the exception of global income funds. Of particular note, all government long funds and loan participation funds underperformed their respective benchmarks over the one-year horizon. This was in stark contrast to results from the SPIVA U.S. Year-End 2018 scorecard when just 17% of government long funds and 57% of loan participation funds underperformed.