According to S&P’s research, just 38.9% of actively managed equity funds in Canada outpaced the S&P/TSX Capped Composite Index during the bear market from August 2000 to December 2002. In the U.S, only 29% outpaced the S&P 500.

True, actively managed funds can hold cash balances, shift into defensive stocks, etc. – so there is a presumption they would do better. In fact, the average return earned by active Canadian equity funds does exceed the index during bearish phases.

But this average return “reflects the strong performance of only a few funds,” declares Jasmit Bhandal, director of Standard & Poor’s Index Services. “The majority of Canadian Equity funds still underperformed their benchmark.”