I would like to thank you for still reading through this dry and technical series. I hope that you have learnt a lot from my second post. This is the third post and we shall look at the performance of the International and Global market. Do note that in the paper, global funds/indexes would include US stocks and international funds/indexes would not include US stocks. The paper can also be found at https://us.spindices.com/documents/spiva/spiva-us-year-end-2017.pdf - you should always check the sources of everything you read on the internet.
Without further ado, let me jump straight into the content:
Table of International, Global, Emerging Market funds and their respective index
| Fund Category | Comparison Index | Percent of funds outperformed by index over 15-Years (%) |
|---|---|---|
| Global Funds | S&P Global 1200 | 82.47 |
| International Funds | S&P International 700 | 91.63 |
| International Small-Cap Funds | S&P Developed Ex-U.S Small Cap | 78.13 |
| Emerging Market Funds | S&P/IFCI Composite | 94.83 |
Comparing this table compared to the U.S stock funds/index performance, we can see a slightly higher proportion of active-managed funds does better compared to the index. But majority of funds are still outperformed by their indexes. Which is important to note: How do you know if a fund would consistently outperform the index? Moving onto the Asset-weighted and Equal-weighted category, here we hope to see if the saying that "bigger funds would perform better" holds up in the international, global, emerging markets.
Average International equity funds 15-Years performance Equal-Weighted and Asset-Weighted
| Fund Category | 15-Year (Equal-Weighted) (%) | 15-Year (Asset-Weighted) (%) |
|---|---|---|
| Global Funds | 8.24 | 9.35 |
| S&P Global 1200 | 9.52 | 9.52 |
| International funds | 7.19 | 8.38 |
| S&P International 700 | 9.21 | 9.21 |
| Emerging Markets Funds | 10.8 | 11.89 |
| S&P/IFCI Composite | 13.41 | 13.41 |
I guess that the assumption does hold up. The bigger fund size would perform better compared to smaller fund size. But funds generally do not out perform their respective indexes
Next, we will be looking at the variance of the international, global and emerging market funds return
Spread of International, global and Emerging Market funds and index 15 year performance
| Fund Category | 25th Percentile (%) | 75th Percentile (%) | Index Performance (%) | Difference (%) |
|---|---|---|---|---|
| Global Funds | 8.27 | 10.22 | 9.52 | 1.95 |
| International Funds | 6.79 | 8.92 | 9.21 | 2.13 |
| Emerging Market Funds | 10.19 | 12.49 | 13.41 | 2.30 |
From the table above, we can see that the emerging market funds have the largest variance. This can be an indication that the emerging market is not as efficient. This shows in the bigger disparity of the 25th to 75th percentile. Furthermore, we can also conclude that more than 75% of funds would underperform their index in a 15 years time horizon for international and emerging market segments.
This would prove that it would be difficult in trying to determine if a fund would outperform the market. You would have a better return if you just stick to the index.
With that, I conclude my 3 part series. I will be writing another post as a summary to the points that I have listed out in the past 3 posts. I will also be writing another multi-part series based on another set of papers. With that, I hope that you have enjoyed it.
Till then,
Stay vested, stay frugal my friends.
Dionysius
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