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The SPIVA Scorecard – A Must-Read for 401(k) Fiduciaries Blog Feature
Eric Droblyen

By: Eric Droblyen on July 10th, 2019

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The SPIVA Scorecard – A Must-Read for 401(k) Fiduciaries

Investments | Thought Leadership | Fiduciary Responsibility

There is no better scorekeeper in the active vs. passive fund debate than the SPIVA Scorecard. Published by S&P Dow Jones Indices, the semi-annual report measures the percentage of actively-managed funds that outperform their market index benchmark over specific periods of time, net of fees. I consider the SPIVA Scorecard a must-read for 401(k) fiduciaries.

Below are results from the year-end 2018 SPIVA Scorecard for domestic, foreign and fixed income markets. Like past scorecards, it found only a small percentage of actively-managed funds outperform the market over time. The takeaway for 401(k) fiduciaries? There is a very good chance that low-cost passively-managed index funds and ETFs that seek to match - not beat - the market will offer superior investment returns over the long term.


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Percentage of U.S. Equity Funds Outperformed by Benchmarks

Fund Category

Comparison Index

1-year

3-year

5-year

10-Year

15-Year

All Domestic Funds

S&P Composite 1500

68.83%

81.49%

88.13%

84.49%

88.97%

All Large-Cap Funds

S&P 500

64.49%

78.98%

82.14%

85.14%

91.62%

All Mid-Cap Funds

S&P MidCap 400

45.64%

74.29%

79.88%

88.03%

92.71%

All Small-Cap Funds

S&P SmallCap 600

68.45%

84.35%

89.40%

85.67%

96.73%

All Multi-Cap Funds

S&P Composite 1500

66.79%

82.44%

88.58%

86.36%

90.70%

Large-Cap Growth Funds

S&P 500 Growth

60.27%

76.00%

87.50%

84.08%

94.59%

Large-Cap Core Funds

S&P 500

75.85%

87.21%

92.35%

93.27%

92.09%

Large-Cap Value Funds

S&P 500 Value

46.27%

70.91%

79.08%

81.71%

79.33%

Mid-Cap Growth Funds

S&P MidCap 400 Growth

15.20%

53.79%

69.38%

87.40%

91.45%

Mid-Cap Core Funds

S&P MidCap 400

62.18%

85.59%

89.26%

90.23%

95.05%

Mid-Cap Value Funds

S&P MidCap 400 Value

72.22%

94.23%

93.55%

87.77%

92.11%

Small-Cap Growth Funds

S&P SmallCap 600 Growth

61.45%

76.32%

88.17%

85.65%

98.17%

Small-Cap Core Funds

S&P SmallCap 600

87.55%

94.17%

95.13%

92.97%

97.44%

Small-Cap Value Funds

S&P SmallCap 600 Value

83.33%

89.38%

94.39%

87.41%

93.51%

Multi-Cap Growth Funds

S&P Composite 1500 Growth

65.90%

81.09%

88.33%

87.39%

90.55%

Multi-Cap Core Funds

S&P Composite 1500

81.74%

91.50%

98.33%

91.79%

92.44%

Multi-Cap Value Funds

S&P Composite 1500 Value

74.77%

80.00%

88.89%

81.48%

86.59%

Real Estate Funds

S&P United States REIT

88.89%

76.47%

75.00%

88.17%

86.21%

Percentage of International Equity Funds Outperformed by Benchmarks

Fund Category

Comparison Index

1-year

3-year

5-year

10-Year

15-Year

Global Funds

S&P Global 1200

70.61%

84.26%

84.92%

81.20%

83.16%

International Funds

S&P 700

76.84%

89.19%

81.78%

81.07%

89.83%

International Small-Cap Funds

S&P Developed Ex-U.S. SmallCap

65.52%

73.42%

73.68%

64.15%

75.86%

Emerging Markets Funds

S&P/IFCI Composite

78.10%

89.27%

92.67%

87.72%

96.15%

Percentage of Fixed Income Funds Outperformed by Benchmarks

Fund Category

Comparison Index

1-year

3-year

5-year

10-Year

15-Year

Government Long Funds

Barclays US Government Long

16.98%

100.00%

96.61%

94.94%

98.04%

Government Intermediate Funds

Barclays US Government Intermediate

100.00%

100.00%

81.82%

80.56%

91.67%

Government Short Funds

Barclays US Government (1-3 Year)

86.96%

81.48%

79.31%

67.65%

82.86%

Investment-Grade Long Funds

Barclays US Government/Credit Long

9.09%

93.48%

98.91%

80.31%

98.41%

Investment-Grade Intermediate Funds

Barclays US Government/Credit Intermediate

90.82%

40.00%

51.63%

49.38%

76.63%

Investment-Grade Short Funds

Barclays US Government/Credit (1-3 Year)

92.55%

45.45%

54.84%

43.75%

70.21%

High Yield Funds

Barclays US Corporate High Yield

75.60%

96.63%

96.52%

96.63%

99.15%

Mortgage-Backed Securities Funds

Barclays US Aggregate Securitized - MBS

84.62%

74.07%

84.48%

64.81%

95.83%

Global Income Funds

Barclays Global Aggregate

60.95%

59.09%

57.66%

47.22%

62.86%

Emerging Markets Debt Funds

Barclays Emerging Markets

92.98%

68.97%

98.00%

90.91%

85.71%

General Municipal Debt Funds

S&P National AMT-Free Municipal Bond

85.33%

67.07%

46.25%

44.59%

84.11%

California Municipal Debt Funds

S&P California AMT-Free Municipal Bond

93.94%

47.22%

27.78%

36.84%

86.96%

New York Municipal Debt Funds

S&P New York AMT-Free Municipal Bond

76.00%

62.96%

35.71%

54.55%

86.84%

Loan Participation Funds

S&P/LSTA U.S. Leveraged Loan 100

56.86%

72.92%

51.06%

80.95%

-

Past Performance Is No Guarantee of Future Results

Investment in passively-managed investments like index funds and ETFs is exploding. According to a Morningstar study, these investments took in a record $504.8 billion in 2016. That’s in contrast to actively-managed funds – who experienced outflows of $340.1 billion in 2016.

Why are investors flocking to index funds? The answer is simple – when compared to comparable actively-managed funds, index funds that track the broad stock market indices are more likely to offer superior returns, net of fees charged.

What does the trend mean for 401(k) fiduciaries? Index funds are now the de facto baseline for 401(k) investment returns. Fiduciaries can try to do better with actively-managed funds, but they should understand the odds are not in their favor. For those that want to try, I strongly recommend they hire an ERISA 3(38) Investment Manager to help tilt the odds. 

 


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About Eric Droblyen

Eric Droblyen began his career as an ERISA compliance specialist with Charles Schwab in the mid-1990s. His keen grasp on 401k plan administration and compliance matters has made Eric a sought after speaker. He has delivered presentations at a number of events, including the American Society of Pension Professionals and Actuaries (ASPPA) Annual Conference. As President and CEO of Employee Fiduciary, Eric is responsible for all aspects of the company’s operations and service delivery.

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