Do Fund Managers Beat the Market in New Zealand? The Evidence Says No

Every time you put money into a fund, you make a quiet choice. You can pay a professional to pick winners for you — an actively managed fund. Or you can buy a slice of the whole market and accept whatever it returns — an index fund.

The question is whether that professional actually earns their fee. For more than twenty years, S&P Dow Jones Indices — the company behind the S&P/NZX 50 and the S&P World Index — has kept score. Their SPIVA report (short for "S&P Indices Versus Active") is the closest thing investing has to an official scoreboard.

We read the latest New Zealand edition cover to cover. The answer is blunt: most actively managed funds lose to the index, and the longer you look, the worse the odds get.

How We Researched This Guide

We went straight to the source. The SPIVA New Zealand Scorecard is published free on S&P Dow Jones Indices' website, so we read the full Year-End edition — the headline numbers, the fund-by-fund tables, and the methodology notes at the back.

Then we read what RNZ and a handful of independent NZ investment firms had written about it, to make sure we hadn't misread anything. Every figure with a percentage or dollar sign attached was checked against the report itself before it landed on this page. Where the report gave a caveat, we kept it — we'd rather leave a number out than guess at it.

The 60-Second Version

In a hurry? Here's the whole report in six lines.

• Most active global share funds lost in the latest year — three in four unhedged, and 86 per cent of the currency-hedged ones.
• Over 10 and 15 years, every single global fund lost — hedged and unhedged alike.
• About two in three NZ share funds lost in the latest year, and 85 per cent over 15 years.
• Bond funds flipped hard — 79 per cent lost in the latest year, after four years of mostly winning.
• The culprit is fees. Active funds cost more, and that gap compounds for decades.
• What to do: find your fund's total fee, then check its after-fee record against a fair benchmark.

What "Active" and "Passive" Actually Mean

An actively managed fund hires a person — or a whole team — to research companies and decide what to buy and sell. You pay for that judgement through higher fees, often around 1-1.5 per cent per year.

An index fund skips the judgement. It owns every share in a benchmark such as the S&P/NZX 50 or the S&P World Index in the same proportions as the benchmark and tracks it. With no expensive research team, fees are far lower — often 0.2 to 0.4 per cent a year.

The bet behind an active fund is that the manager's skill will add more value than the extra fee they charge. SPIVA exists to measure how often that bet pays off.

What the Scorecard Found

SPIVA sorts every actively managed fund sold to NZ investors into categories — global shares, NZ shares and bonds — and measures each one against the index it should be judged against. It then reports the percentage that fell short over one, three, five, ten, and fifteen years.

Here's the headline, for the year covered by the latest report.

*Over both the ten-year and fifteen-year periods, not a single global share fund — hedged or unhedged — beat its benchmark.

Three things jump out of the table.

• Global shares: three in four unhedged funds lost in the latest year — and nearly nine in ten of the currency-hedged ones. Stretch the timeframe, and it's every single fund, hedged and unhedged alike.
• NZ shares: about two in three lost in the latest year, and 85 per cent over fifteen years.
• Bonds: the sharpest reversal. The year before, only about one in five active bond funds lost to the S&P/NZX Composite Investment Grade Bond Index. In the latest year, that jumped to nearly eight in ten.

For context, the S&P/NZX 50 returned 4.08 per cent over the year, including imputation credit. The point isn't that markets did badly — they didn't. It's that even in a reasonable year, most active managers still couldn't clear their benchmark.

Why Most Funds Fall Behind

Strip away the jargon, and SPIVA is really a report about two things: fees and the funds that quietly disappear.

Fees first. An active fund charging 1.25 per cent a year has to beat the market by a full percentage point, every single year, to match an index fund charging 0.25 per cent — before it delivers you anything extra. On a $50,000 balance, that's about $625 a year versus $125. That gap compounds for as long as you hold the fund.

Then there's survivorship. Most performance tables only show the funds still around today. SPIVA keeps the failures in the count, so the funds that merged or shut down after a run of poor returns can't quietly vanish from the record.

How many disappear? Over ten years, 16 per cent of NZ active funds were merged or liquidated. Over fifteen years, it's 47 per cent — nearly half. In the latest year itself, only one of the 118 funds in the sample closed, so it's a slow burn rather than a sudden wipeout.

That reframes the question most investors ask. Instead of "will my fund beat the index?", the first question is "will my fund still exist?". Over fifteen years, the answer was no about half the time — and a fund rarely gets shut down after a run of good years.

Where Active Still Earns Its Fee

SPIVA is powerful evidence, but it isn't the whole story. We found a few things it doesn't claim.

• It says nothing about advice. SPIVA measures fund picking, not the value of a good adviser — who can help with structure, tax, retirement income and the discipline to stay invested. That value sits entirely outside the report.
• Winners do exist. When 85 per cent of NZ share funds lose over fifteen years, the other 15 per cent beat the index — real funds run by real people. The report doesn't name them — it publishes percentages, not a leaderboard. So you can't simply buy last year's winners; you'd have to identify them in advance, which is the part almost nobody can do reliably.
• Bonds are genuinely more mixed. Counted by the money actually invested in them, active bond funds edged ahead of the bond index over fifteen years. Counting funds and counting dollars tell different stories.
• Index funds fall in downturns too. Tracking an index means you get the whole ride, up and down. SPIVA makes a case about fees and odds, not a promise about what the market does next.

One note on the data itself: S&P's NZ-dollar global share indices are still new, so the longer-term global figures rely partly on back-tested data. S&P discloses this, and it's worth keeping in mind when you look at the ten- and fifteen-year global numbers.

Questions You Might Have

Isn't SPIVA biased, given S&P sells the indices?

A fair question — S&P earns licensing fees whenever an index fund tracks one of its indices. Three things make the report widely trusted. The methodology has been public for over twenty years so that anyone can pull it apart. The fund data comes from an independent fund database, not from S&P itself. And academic research unrelated to S&P keeps finding the same pattern in active returns.

Does this cover KiwiSaver funds?

Not directly. SPIVA measures managed funds sold in NZ, not a separate KiwiSaver table. But the test it applies — did the fund beat a fair benchmark after fees? — is exactly the one that matters for KiwiSaver. You can run it yourself using your fund's quarterly update.

Where can I read the full report?

S&P Dow Jones Indices publishes the SPIVA New Zealand Scorecard free on its website. A new edition lands around April or May each year, covering the previous calendar year.

Does this mean I should only ever use index funds?

Not necessarily. Index funds win on fees and odds, but they aren't the only consideration. Some investors genuinely value active management in specific areas — NZ bonds are one, given the mixed picture there — and a good adviser adds value beyond fund picking. The lesson isn't that active is bad. It's that the fund charging you the higher fee should have to prove it's worth it.

What Matters Most

The evidence is remarkably consistent. Most actively managed funds in NZ don't beat the index, and the longer you look, the fewer do — over ten and fifteen years, not one global share fund managed it. Nearly half the funds that existed fifteen years ago no longer exist.

That doesn't mean you should switch everything to index funds tomorrow. It means the burden of proof sits with the fund charging you the higher fee. Check your total fee, compare it against a fair benchmark over ten years, and let the after-fee numbers — not the marketing — make the case.