Passive Management (ETF) vs Active Management: 20 Years of SPIVA Data Decide

Passive Management vs Active Management: 20 Years of SPIVA Data Decide

For more than two decades, the question of relative performance between passive and active management has fueled debates and investment choices. Thanks to the SPIVA® Scorecard 2023 report published by S&P Dow Jones Indices, we have a robust and objective database allowing long-term analysis of active funds' ability to outperform their benchmark indices. This article details the major insights drawn from over 20 years of data, particularly on US, European, and French markets, and explains why passive management through ETFs is now established as the dominant strategy for individual investors.

SPIVA Scorecard 2023: An Unambiguous 20-Year Finding in the United States

The SPIVA US Scorecard 2023 analyzes the performance of active US equity funds relative to the S&P 500 index over various periods. Over 20 years, the most striking data point is that 92.2% of active US equity funds underperform the S&P 500 net of fees.

For example, a popular active fund like the Fidelity Contrafund (ISIN US3159116939) shows an annualized return of 8.1% over 20 years, compared to 9.1% for the S&P 500 total return. This clearly illustrates the structural difficulty managers face in creating value after fees.

Europe: 82% of Equity Funds Underperform Over 10 Years

The SPIVA Europe Scorecard 2023 confirms a similar trend, although slightly less pronounced than in the United States. Over 10 years, 82% of active European equity funds have underperformed the MSCI Europe net dividend index.

The challenge is even more pronounced in certain countries, notably France. Over 10 years, 78% of active French equity funds have underperformed the CAC 40 NR (net reinvested dividends).

Why Is This Underperformance Structural?

Several factors explain this near systematic defeat of active management: