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Active management faced more favorable conditions in Latin America during the first half of 2026. In an environment of greater volatility and dispersion among securities, fewer than half of domestic funds underperformed their benchmarks across the main categories tracked in Brazil, Chile, and Mexico. Underperformance rates ranged from 24.5% to 46.3%.
The recent picture contrasts with the longer record. In every domestic category covered by the SPIVA Latin America Scorecard, most active funds underperformed their respective benchmarks over the ten years ended June 2026.
The difference between the first-half and ten-year results is the study’s central point. Beating an index under a particular set of market conditions is possible, as most domestic funds demonstrated in early 2026. Maintaining that advantage through different economic cycles and financial conditions has proved considerably more difficult.
SPIVA Latin America in five numbers
| Indicator | Result |
|---|---|
| Lowest first-half underperformance rate (Brazil treasury bonds) | 24.51% |
| Highest first-half underperformance rate (Brazilian stocks) | 46.31% |
| Brazilian equity funds below the index over ten years | 89.15% |
| Brazilian corporate debt funds below the index over ten years | 93.63% |
| Ten-year survival rate for Brazilian equity funds | 47.80% |
The figures do not establish an absolute winner in the debate between active management and index-based strategies. Instead, they show two separate dimensions: the opportunities that may arise during a specific period and the difficulty of turning those results into a persistent advantage.
What SPIVA measures?
Produced by S&P Dow Jones Indices, SPIVA compares actively managed funds with benchmarks that correspond to their investment categories. The Latin American edition covers locally domiciled funds in Brazil, Chile, and Mexico, denominated in each market’s local currency.
In Brazil, broad equity funds are compared with the S&P Brazil BMI. Large-cap funds are measured against the S&P Brazil LargeCap, while mid- and small-cap funds are compared with the S&P Brazil MidSmallCap. In fixed income, the IDA represents the corporate bond market and the IMA serves as a benchmark for government securities.
The report also presents survival rates, equal-weighted averages, asset-weighted averages, performance quartiles, and risk-adjusted comparisons. Taken together, these measures distinguish a category’s average return from the experience observed across most individual funds.
Brazil recorded different results across company sizes
Brazilian equity performance was uneven during the first half. The S&P Brazil LargeCap gained 2.96%, while the S&P Brazil BMI advanced 1.61%. The S&P Brazil MidSmallCap declined 1.55%, reflecting a more difficult period for mid- and small-cap stocks.
Large-cap leadership was also evident in fund results. Only 31.21% of Brazilian large-cap funds underperformed their benchmark, meaning approximately two out of every three beat the S&P Brazil LargeCap during the period.
Among broad Brazilian equity funds, 46.31% trailed the S&P Brazil BMI. The underperformance rate was 44.49% for mid- and small-cap funds. Most funds therefore exceeded their benchmarks in all three Brazilian equity categories.
Active management in Brazil: first half versus ten years
| Category | Benchmark | First-half index return | Funds below in the first half | Funds below over ten years |
|---|---|---|---|---|
| Broad equities | S&P Brazil BMI | 1.61% | 46.31% | 89.15% |
| Large caps | S&P Brazil LargeCap | 2.96% | 31.21% | 67.42% |
| Mid and small caps | S&P Brazil MidSmallCap | -1.55% | 44.49% | 81.72% |
| Corporate debt | IDA | 4.40% | 24.51% | 93.63% |
| Government debt | IMA | 5.83% | 37.59% | 93.40% |
The strongest relative first-half result appeared in corporate debt, where only 24.51% of funds trailed the IDA. Among equity funds, large-cap strategies recorded the lowest underperformance rate. Over ten years, the benchmarks beat most funds across all five Brazilian categories.
Approximately two out of every three Brazilian large-cap funds beat their benchmark during the first half. Over ten years, 67.42% underperformed the index.
Greater dispersion expanded the opportunity for stock selection
The stronger showing by Brazilian managers coincided with increasing return dispersion, particularly among large-cap stocks.
Dispersion measures differences among the returns of an index’s constituent securities. When stocks produce similar results, choosing one over another creates less differentiation from the market. When the distance between winners and losers increases, security selection has a greater effect on portfolio performance.
Understanding dispersion
Low dispersion: stocks produce more similar returns, leaving less room to differentiate through security selection.
High dispersion: the gap between winning and losing stocks increases, making portfolio choices more consequential.
Greater dispersion magnifies both the potential benefit of selecting stronger stocks and the potential loss from choosing weaker ones. It creates opportunity, but does not guarantee outperformance.
Stock-level dispersion increased across all three Brazilian equity categories during the first half. The S&P Brazil LargeCap recorded the largest absolute increase among the markets examined. Dispersion remained stable or declined slightly in Chile and Mexico.
Large-cap stocks also outperformed mid- and small-cap stocks in Brazil, favoring portfolios that maintained more exposure to the stronger large companies.
Funds did better than the distribution of stocks suggested
Among the constituents of the S&P Brazil BMI, 58.6% underperformed the index during the first half. The underperformance rate among active funds was lower, at 46.3%. In the large-cap segment, 38.5% of stocks trailed the index, compared with 31.2% of funds.
This result runs counter to a frequent SPIVA pattern, in which the proportion of funds trailing the index is higher than the proportion of individual stocks underperforming it. During the first half of 2026, the relationship reversed across the domestic equity categories examined in Brazil, Chile, and Mexico.
The comparison indicates that managers, as a group, used the available return distribution effectively during the period. Results were not uniform, but the share of successful strategies was higher than the asymmetry among index constituents suggested.
Fund assets also influenced performance
SPIVA calculates average fund performance in two ways. In an equal-weighted average, each fund has the same influence on the result. In an asset-weighted average, larger funds receive more weight.
Average first-half performance in Brazil
| Category | Index return | Equal-weighted average | Asset-weighted average |
|---|---|---|---|
| Broad equities | 1.61% | 2.73% | 2.57% |
| Large caps | 2.96% | 4.54% | 6.18% |
| Mid and small caps | -1.55% | -0.55% | 1.58% |
| Corporate debt | 4.40% | 6.16% | 6.54% |
| Government debt | 5.83% | 5.38% | 6.37% |
Among large-cap funds, the asset-weighted average reached 6.18%, above the equal-weighted average of 4.54% and the benchmark’s 2.96% return. Larger funds, in aggregate, produced stronger results in this category.
Among mid- and small-cap funds, the equal-weighted average was -0.55%, while the asset-weighted return reached 1.58%. Both exceeded the index’s -1.55% return, but the gap also points to stronger performance among larger funds.
The broad equity category produced a different relationship. Its equal-weighted return of 2.73% was slightly higher than the asset-weighted result of 2.57%. Fund size therefore did not have a uniform relationship with performance across every category.
The advantage changes as the horizon expands
The longer the horizon, the greater the challenge
| Category | 6 months | 1 year | 3 years | 5 years | 10 years |
|---|---|---|---|---|---|
| Broad equities | 46.31% | 57.58% | 77.20% | 76.19% | 89.15% |
| Large caps | 31.21% | 43.18% | 75.48% | 72.07% | 67.42% |
| Mid and small caps | 44.49% | 51.19% | 59.11% | 63.93% | 81.72% |
| Corporate debt | 24.51% | 23.22% | 35.03% | 39.46% | 93.63% |
| Government debt | 37.59% | 46.50% | 48.64% | 49.91% | 93.40% |
The deterioration is not linear across every category. The ten-year underperformance rate for large-cap funds, for example, is lower than the corresponding three- and five-year rates. Among corporate debt funds, the one-year rate is slightly lower than the first-half figure.
The overall conclusion remains consistent: most funds underperformed their benchmarks over ten years in all five Brazilian categories.
The S&P Brazil BMI delivered an annualized ten-year return of 12.69%, compared with an equal-weighted fund average of 10.54%. The S&P Brazil LargeCap returned 12.64%, versus 11.73% for the corresponding funds.
An average above the index does not mean most funds won
Brazilian mid- and small-cap funds provide an important example of how performance statistics should be interpreted.
Their equal-weighted annualized return was 12.75% over ten years, slightly above the S&P Brazil MidSmallCap’s 12.51%. At the same time, 81.72% of the funds underperformed the index.
Average return and underperformance rate measure different outcomes
Average return: shows the category’s aggregated performance and can be lifted by a limited number of particularly strong funds.
Underperformance rate: shows how many funds trailed the benchmark.
A category can produce an average above the benchmark even when most of its funds underperform.
A smaller group of mid- and small-cap funds generated returns high enough to lift the category’s average. The predominant experience across individual funds, however, was underperformance.
Survival is also part of the analysis
A fund that existed at the beginning of a period was part of the available opportunity set, even if it was subsequently liquidated or merged. SPIVA keeps these funds in the analysis, addressing the bias that would arise if only surviving products were considered.
Ten-year survival among Brazilian funds
| Category | Funds at the beginning | Survival rate |
|---|---|---|
| Broad equities | 295 | 47.80% |
| Large caps | 89 | 70.79% |
| Mid and small caps | 93 | 65.59% |
| Corporate debt | 204 | 25.49% |
| Government debt | 394 | 69.29% |
Fewer than half of the 295 broad Brazilian equity funds in existence at the beginning of the period were still active at the end of the ten-year window. Corporate debt recorded the lowest survival rate, at 25.49% of the original 204 funds.
A fund’s liquidation or merger does not necessarily represent a loss for every investor. The survival rate measures whether the product remained active as an independent fund, not the individual financial outcome for each shareholder.
Brazilian fixed income also had a positive first half
The IDA, which represents Brazil’s corporate bond market, gained 4.40% during the first half. Only 24.51% of corporate debt funds underperformed the index. Their equal-weighted average return was 6.16%, while the asset-weighted result reached 6.54%.
The IMA, the benchmark for government securities, advanced 5.83%. Among government debt funds, 37.59% trailed the index. The equal-weighted average was 5.38%, below the benchmark, while the asset-weighted return reached 6.37%.
Over ten years, 93.63% of corporate debt funds underperformed the IDA and 93.40% of government debt funds trailed the IMA. Corporate debt funds produced an annualized average return of 8.27%, compared with 10.06% for the index. Government debt funds returned 9.59%, versus 9.89% for their benchmark.
Chile and Mexico repeat the regional contrast
Brazil, Chile, and Mexico
| Market | First-half benchmark return | Funds below in the first half | Funds below over ten years | Ten-year survival rate |
|---|---|---|---|---|
| Brazil, broad equities | 1.61% | 46.31% | 89.15% | 47.80% |
| Chile, equities | 3.43% | 32.50% | 88.10% | 28.57% |
| Mexico, equities | 5.81% | 43.48% | 75.61% | 82.93% |
In Chile, the S&P Chile BMI gained 3.43%, while 32.50% of funds underperformed the index. The underperformance rate reached 88.10% over ten years, and 28.57% of the funds in existence at the beginning of the decade remained active through the end.
In Mexico, the S&P/BMV IRT advanced 5.81%. The fund underperformance rate was 43.48% during the first half and 75.61% over ten years. Its 82.93% survival rate was the highest among the domestic equity categories examined.
Global equities proved more challenging
Among Brazilian global equity funds denominated in reais, 61.90% underperformed the S&P World Index during the first half. The rate reached 94.12% over ten years.
Brazilian U.S. equity funds were a short-term exception. Only 38.10% trailed the S&P 500 in reais during the first half. Their equal-weighted return was 6.82%, compared with 4.10% for the index, while the asset-weighted average reached 8.96%. Over ten years, however, 95% of funds underperformed the benchmark.
The study identifies the use of S&P 500 futures combined with local sovereign bonds among a sample of the better-performing Brazilian U.S. equity funds. This structure illustrates how index-linked instruments, including derivatives and ETFs, can be used to implement tactical decisions within actively managed funds.
The distinction between active management and index investing therefore does not depend exclusively on the instruments held in a portfolio. An active manager can use futures or ETFs to carry out an allocation decision, while an index-based strategy may follow predefined rules without attempting to anticipate market movements.
What the scorecard teaches about fund evaluation?
The first half of 2026 demonstrates that active management can beat indexes under specific conditions. In Brazil, higher dispersion, large-cap leadership, and a wider gap between winning and losing stocks created a more favorable environment for active selection.
The ten-year record leads to a different conclusion. Most funds underperformed their benchmarks across every domestic category, including those that posted strong first-half results.
Three central conclusions
1. The short term favored active management
Most domestic funds beat their benchmarks during the first half, with particularly strong results among Brazilian large-cap and corporate debt funds.
2. Dispersion created opportunity, not certainty
A wider gap between winning and losing stocks expanded the potential for successful selection, but also increased the consequences of unsuccessful choices.
3. Persistence remained the central challenge
Over ten years, most funds underperformed the indexes in every domestic category examined in Brazil, Chile, and Mexico.
The contrast highlights the importance of examining multiple time horizons. A recent result may reflect well-executed decisions, but it may also coincide with conditions that particularly favor a fund’s investment style. A longer record covers different environments and offers a broader test of consistency.
Rather than identifying a definitive winner between active management and indexes, SPIVA highlights the distinction between temporary success and persistence. The first half shows that managers can benefit from favorable market configurations. The decade shows that turning those opportunities into a lasting advantage remains a significant challenge.
