Better Money Return

SPIVA: 2021 Year-End Active vs. Passive Scorecard

Better Money Return

A lack of consistency by active fund managers in beating their respective benchmarks has been a constant theme of research over the years from the S&P Indices Versus Active (SPIVA) scorecards.

With roots tracing back to 2002, this benchmarking series in its most well-known form semiannually reviews data tracking performance of active fund managers against their respective S&P indexes. 

A wealth of academic evidence warns that trying to time markets as a reaction to stock price fluctuations is a foolhardy endeavor. From Nobel laureates such as Eugene Fama and Harry Markowitz to William Sharpe and Merton Miller, playing fluctuations by trying to time markets in the near-term can effectively lower an investor's long-term expected returns.  

"Fund managers often respond to evidence of active underperformance by claiming to offer better returns per unit of volatility (i.e., to outperform in risk-adjusted terms)," noted S&P researchers in their latest SPIVA report covering the past 20 years (through 2021). They added:

"This would be an appropriate counterargument, if only it was true. However, the data shows that the vast majority of actively managed funds underperformed on this metric as well. Among domestic equity funds, while 90% have underperformed on the S&P Composite 1500 over the past 20 years, an even greater 95% did so on a risk-adjusted basis."

Bond markets have provided little cover for active fund investors, according to the SPIVA Scorecard. It found more than 60% of active managers did not surpass their benchmarks across all fixed-income categories during the past 15 years through 2021 — on both an absolute and risk-adjusted basis.

The scorecard's results show that regardless of asset class or style focus, active management outperformance is typically short-lived. In fact, a minority of funds studied wound up consistently outranking their peers or benchmarks. 

The big picture takeaway of SPIVA's latest scorecard: In good times as well as bad, active management has consistently produced underwhelming results.

For example, as illustrated below, SPIVA found that more than 95% of all domestic active stock fund managers had underperformed their respective S&P benchmarks in the past 20-year period through 2021. In U.S. small caps, nearly 94% of active fund managers lagged the S&P SmallCap 600 benchmark. Even active management's record in foreign markets over the past 20 years raised red flags. Inquisitive investors might take note that almost 93% of international stock fund managers weren't able to beat their respective S&P indexes.

Performance Comparisons

U.S. Equity

The pie charts below show the percentage of active U.S. equity funds that underperformed their respective benchmarks for the 20-year period ended Dec. 31, 2021.

International Equity

The pie charts below show the percentage of active international equity funds that underperformed respective benchmarks for the 20-year period ended Dec. 31, 2021.


The pie charts below show the percentage of active bond funds that underperformed respective benchmarks for the 15-year period ended Dec. 31, 2021.

Lagging performance by active fund managers isn't a new story. As we've been chronicling for decades, leading market researchers know better than to listen to boasts about peer-beating results. Instead, managers are held to a higher standard — namely, how they've done against their respective benchmarks. 

Besides comparing active managers against index results, the SPIVA research series also separates itself from the pack by taking into account survivorship bias and style consistency issues that can tilt performance numbers in active management's favor.

The SPIVA scorecard sorts through such 'noisy' data by scrubbing performance numbers in several different ways. Two of the most significant relate to:

    • Survivorship Bias. This is a common practice in which managers merge or close funds. In the past 20 years, according to SPIVA research, nearly 70% of domestic stock funds and more than two-thirds of international equity funds were shuttered or folded into other managers' coffers. Why is this so alarming? Poor results are essentially swept underneath the rug, either going away completely and/or replaced by another fund's performance record. Hence the "shell game" nomenclature.
    • Style Consistency. S&P researchers track how consistent managers are in following their style mandates. For example, if a large growth manager decides to buy a lot of value stocks at any given time, the SPIVA data will be adjusted to track those changes using a more appropriate benchmark and fund category. As a result, such a research methodology offers a more precise "apples-to-apples" comparison of relative performance over time.

At IFA, our investment committee encourages investors not to trust any research that doesn't scrub return numbers to take into account these types of actively managed "shell" games. As the latest data from S&P's SPIVA study indicates, (see charts below), the impact of survivorship bias and style consistency has proven to be significant over time. 

In our own research, we've found a consistent pattern — active management doesn't live up to its own hype. The inclusion of the statistical significance of alpha is key to IFA's analysis when constructing a globally diversified portfolio of index funds. Taking such a scientific approach enables us to recognize if a manager's recent burst of outperformance is likely a result of luck — i.e., random chance — as opposed to actual skill. 

The SPIVA research scorecard is just another piece of evidence that investors should not try to "beat the market" — and, are likely going to wind up failing, thereby jeopardizing a portfolio's long-term well-being. Along these lines, we remind investors that each IFA client is offered complimentary holistic and unique financial plan. This planning tool is designed to serve as a comprehensive blueprint to help guide each person's wealth-building future. 

This is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, product, service, or considered to be tax advice. There are no guarantees investment strategies will be successful. Investing involves risks, including possible loss of principal. This is intended to be informational in nature and should not be construed as tax advice. IFA Taxes is a division of Index Fund Advisors, Inc. For more information about Index Fund Advisors, Inc., please review our brochure at or visit