S&P 500 Dividend Aristocrats: The Importance of Stable Dividend Income
Dividends play an important role in generating equity total return. Since 1926, dividends have contributed approximately 32% of total return for the S&P 500, while capital appreciations have contributed 68%. Therefore, sustainable dividend income and capital appreciation potential are important factors for total return expectations. The S&P 500 Dividend Aristocrats index exhibits both capital growth and dividend income characteristics, as opposed to alternative income strategies that may be pure yield or pure capital-appreciation oriented.
SPIVA U.S. Scorecard: Mid-Year 2023
The S&P 500® rose by 16.9% in the first six months of 2023, marking a sharp rebound from its decline of 18.1% in 2022. There was also a notable reversal of performance among S&P 500 sectors—2022's three worst sectors were the only sectors to outperform the index in the first half of 2023. How did U.S. active funds stack up to their benchmarks in this shifting market environment?
The Case for Indexing Thematics with the S&P Kensho New Economies
Over the past two decades, 95% of all actively managed large-cap U.S. funds lagged the S&P 500®. As indexing has grown, many passive investors have benefited by saving on fees and avoiding active underperformance. Underperformance in the world’s largest equity market can be partly explained by factors such as the positive skewness of equity markets, the professionalization of investment management and cost. However, the dynamics driving the relative performance of active funds in more specific markets, including thematic funds, are less well understood. In this paper, we show that similar principles apply to the thematics space, along with some unique challenges.
More Equal than Others: 20 Years of the S&P 500® Equal Weight Index
With over 20 years of live performance, the S&P 500 Equal Weight Index’s history enables long-term comparisons to other indices and actively managed funds. The relative performance of the S&P 500 Equal Weight Index offers insightful perspectives on the drivers of performance in—and the value added or subtracted by—actively managed U.S. equity funds. Despite sharing a similar pattern of excess returns, very few active funds were able to match the index’s returns over the past two decades.
The Evolution of the Fixed Income Tradable Ecosystem
Fixed income indices have helped modernize fixed income markets by providing a method for standardization. Fixed income tradable indices go a step further by underlying tradable instruments like ETFs and swaps and thereby building a bridge to investor implementation and actionable insight. Learn how fixed income indices are playing a key role in the evolution of the credit ecosystem.
SPIVA U.S. Year-End 2022
Declining markets can make active management skill more valuable, and our 2022 scorecard identifies several fund categories in which a majority of active managers outperformed. However, in the largest and most closely watched category, U.S. large-cap equities, a slim majority underperformed. On the positive side, this was the lowest underperformance rate since 2009 and the fourth best across more than two decades of our annual SPIVA Scorecards. Less positively, 2022 was characterized by several specific and unusual active tailwinds that may not persist.
Shooting the Messenger
The growth of indexing has been driven by the inability of active managers, in aggregate, to outperform passive benchmarks—a phenomenon first reported 90 years ago. Active performance shortfalls can be attributed to three factors: the professionalization of investment management, cost and the skewness of stock returns. Since each of these factors is likely to persist, the advantage of indexing over active management is likely to persist as well.
Assessing the Impact of 20 Years of SPIVA
S&P Indices vs. Active (SPIVA) Scorecards compare the short- and long-term performance of active funds to their benchmarks around the world. As this year marks the 20-year anniversary of the first SPIVA Scorecard, we take an in-depth look at why passive continues to outperform active over the long term, the most surprising results we've seen across fund categories and what all of this means for investors today.
S&P 500 ESG Index: Defining the Sustainable Core
Broad-market exposure meets sustainability. The S&P 500 ESG Index is a market-cap-weighted index that is designed to measure the performance of securities meeting sustainability criteria, while maintaining similar overall industry group weights as the S&P 500. Intentionally broad—including over 300 of the original S&P 500 companies—the index seeks to reflect many of the attributes of the S&P 500 itself, while providing an improved sustainability profile.
Index Construction Matters: The S&P SmallCap 600
Launched in 1994, the S&P 600 is designed to track the performance of small-cap U.S. equities and has outperformed the Russell 2000 by an average of 1.6% per year over the past 25 years. This outperformance highlights the importance of index construction. Unlike the Russell 2000, the S&P 600 uses an earnings screen—companies must have a track record of positive earnings before they are eligible to be added to the index. This quality factor exposure has played a significant role in explaining the S&P 600’s relative returns and its status as a harder benchmark for active managers to beat.
SPIVA U.S. Mid-Year 2022 Scorecard
Declining markets make active management skills more valuable. In the first half of 2022, a significant minority of active managers were able to outperform their benchmarks in several categories. After suffering an 85% underperformance rate in 2021, just 51% of large-cap domestic equity funds lagged the S&P 500 in the first six months of 2022, putting actively managed large-cap U.S. equity funds on track for their best (i.e., lowest) underperformance rate since 2009. Find out if the same held true for mid-cap, small-cap, growth, value, international equity and fixed income funds, and see how the trends play out over longer time horizons.
Concentration within Sectors and Its Implication for Equal Weighting
Concerns about the degree of concentration in cap-weighted indices like the S&P 500 seem to arise whenever performance is dominated by mega caps. After peaks in concentration, the S&P 500 Equal Weight Index has typically outperformed its cap-weighted counterpart. In this paper, we propose an alternative way to measure concentration. By adjusting the Herfindahl-Hirschman Index to account for the number of names in a sector, we’re able to make meaningful cross-sector comparisons. We show that concentration tends to mean-revert in most sectors, which has important implications for the relative performance of equal weighting.
Defense Beyond Bonds: Defensive Strategy Indices
Market cycles are inevitable in investing, and investors are understandably wary of downturns in the equity market. While today’s interest rate trends may mean that bonds are a less appealing defensive asset than they have been historically, it is possible to position allocations defensively with factor-based equity indices. Combining well-chosen defensive factors with the S&P 500 and bonds has historically resulted in reduced volatility, as well as incremental returns.
Inside the BBB Investment-Grade Credit Market
As the largest segment of the IG credit market, the BBB rated segment of the USD IG corporate bond market is becoming increasingly important to IG debt investors looking for incremental yield and risk exposure. Learn how the recently launched iBoxx USD Liquid Investment Grade BBB 0+ Index tracks this market, which:
- has outperformed the broader IG market on a risk-adjusted return basis
- may offer a pickup in yield
- may help refine exposure and grant greater flexibility in positioning
A Streamlined Approach to Multi-Asset with the S&P Target Risk Indices
Multi-asset strategies have caught the eye of market participants seeking pre-packaged solutions to diversification. Whereas many of these strategies are becoming increasingly complex—with black-box allocation algorithms, multiple signals, and 10 or more components—the S&P Target Risk Indices offer a more transparent approach.
Read on to explore:
- Allocating between equity and fixed income according to risk appetite
- The performance of conservative indices in past bear markets
- The performance of aggressive indices over the long term