S&P Releases First Quarter 2007 Index Versus Active Fund Scorecard

NEW YORK, April 25 /PRNewswire/ -- Standard & Poor's, the leading provider of financial market intelligence, released today the latest Standard & Poor's Indices Versus Active Funds Scorecard (SPIVA) results. According to SPIVA, indices led active funds in both the mid- and small-cap categories in the first quarter of 2007. The S&P MidCap 400 outpaced 84.8% of mid-cap funds and the S&P SmallCap 600 led 53.5% of small-cap funds. Actively managed funds performed better in the large-cap category, however, with 64.1% beating the S&P 500.

"In the first quarter, a majority of active large-cap managers outperformed the S&P 500," says Rosanne Pane, Mutual Fund Strategist at Standard & Poor's. "We believe they did so by tapping into mid-cap and international securities."

Looking at longer time periods, indices continue to exceed a majority of active funds. Over the past three years (and five years), the S&P 500 has outperformed 65.7% (72.2%) of large-cap funds, the S&P MidCap 400 has beaten 68.6% (77.4%) of mid-cap funds, and the S&P SmallCap 600 has outpaced 80.2% (77.7%) of small-cap funds.

The figures are corrected for survivorship bias, which has been known to skew traditional fund analysis. Over the last five years, 29.3% of domestic equity funds and 28.6% of economic sector funds have merged or liquidated.

"The SPIVA report shows that approximately 30% of active funds have disappeared over five-year horizons," says Srikant Dash, Index Strategist at Standard & Poor's. "This high death rate makes it crucial to address survivorship bias in mutual fund analysis."

International Equities

In the first quarter of 2007, 63.9% of global funds outperformed the S&P/Citigroup PMI World Index. Indices led in other international categories, however. The S&P/Citigroup PMI World ex U.S. outpaced 58.5% of international funds and the S&P/Citigroup EMI World ex U.S. led 52.0% of international small company funds. The S&P/IFCI Composite also outperformed 58.4% of actively managed emerging markets funds. Similar to domestic equities, international indices also lead over the longer-term three- and five-year periods.

Fixed Income

For the first quarter, six of eight domestic taxable fixed income indices (Lehman Brothers Bond Indices) have outpaced active funds, with active long- term government and convertible funds being the exceptions. In 2007, the Lehman Brothers Global Aggregate Bond Index outperformed 64.7% of global fixed income funds, while 68.2% of emerging markets funds outperformed the Lehman Brothers Emerging Markets Index and 94.4% of active global multisector funds outperformed the Lehman Global Aggregate Bond Index for the quarter.

The complete first quarter 2007 SPIVA scorecard, as well as previous quarterly SPIVA reports, is available on http://www.spiva.standardandpoors.com/.

About SPIVA

The SPIVA scorecard reveals quarterly performance data for domestic equity mutual funds benchmarked against nine corresponding S&P indices and eight sector indices, including the S&P 500 for large-cap funds, the S&P MidCap 400 for mid-cap, the S&P SmallCap 600 for small-cap, and the S&P Composite 1500 for broad market comparisons. Standard & Poor's growth and value indices are used for style categories. S&P 500 sector indices and the S&P REIT index are used for sector categories. Lehman indices are used for fixed income funds, and S&P international equity indices are used for international equity funds. More than 4200 actively managed funds are covered in the scorecard.

The SPIVA methodology is designed to provide an accurate and objective apples-to-apples comparison of funds' performance versus their appropriate style indices, correcting for factors that have skewed results in previous index-versus-active analyses in the industry. SPIVA scorecards show both asset-weighted and equal-weighted averages, include survivorship bias correction to account for funds that may have merged or been liquidated during the period under study, and show style consistency for each style group across different time horizons.

About Standard & Poor's

Standard & Poor's, a division of The McGraw-Hill Companies , is the world's foremost provider of financial market intelligence, including independent credit ratings, indices, risk evaluation, investment research and data. With approximately 8,500 employees, including wholly owned affiliates, located in 21 countries, Standard & Poor's is an essential part of the world's financial infrastructure and has played a leading role for more than 140 years in providing investors with the independent benchmarks they need to feel more confident about their investment and financial decisions. For more information, visit http://www.standardandpoors.com/.