The SPIVA NZ Scorecard's own methodology, applied to passive NZ equity funds, produces the same flawed result

This is a short follow-up to the article titled “Index washing: how dirty data pollutes the NZ active (and passive) environment” that Aurellan Asset Management wrote about the SPIVA New Zealand Scorecard.

In this follow-up article we comment on S&P Dow Jones Indices' recently published mid-year 2026 SPIVA New Zealand Scorecard data. We applied the same methodology that produced the prominent “underperformance” claim in that Scorecard to a small sample of passive New Zealand equity funds. The purpose of doing this is to highlight what we believe are flaws both in the underlying methodology and in the claim itself.

SPIVA'S MID-YEAR 2026 CLAIM: NEW ZEALAND EQUITY FUNDS

“As a result, 80% of funds underperformed the benchmark.”

This quote comes from S&P Dow Jones Indices' SPIVA New Zealand Scorecard for NZ equities, mid-year 2026 edition, covering the six months ended 30 June 2026.

To generate this statistic, S&P Dow Jones Indices appears to have taken a broad set of actively managed Australasian equity funds and compared their performance against a single index, the S&P/NZX 50 Index. No consideration appears to have been given to each individual fund's actual benchmark and mandate, which can vary widely across the universe of funds.

We think this methodology is fundamentally flawed and produces unbalanced, meaningless results. When repeated in quotes like “80% of (active) funds underperformed the benchmark,” this can lead readers to the wrong conclusions about the success, or otherwise, of active management. This is a mirror repeat of the same issue we raised in our earlier article, “Index washing: how dirty data pollutes the NZ active (and passive) environment,” which focused on the 2025 SPIVA New Zealand Scorecard.

THE MIRROR TEST, PART TWO

In our original article we turned the Scorecard's own method back on New Zealand-available passive global equity funds. We found that 86% of a sample of index and passive global equity funds “underperformed” the S&P World Index over the three years to 31 July 2026, not because those funds are poorly run, but because none of them are actually designed to track that particular index. We concluded it was wrong to describe this as underperformance.

To once again demonstrate the flaws in this approach, we applied the same methodology and index that S&P Dow Jones Indices used to assess active management to 11 passive New Zealand equity funds, using their returns for the 12 months to 31 August 2026. We chose this group of passive funds because the one-year return data was readily available, not because they represent the full population of passive New Zealand equity funds. The S&P/NZX 50 Index (Gross) returned 7.63% for the year to 31 August 2026.

The result: 9 of the 11 passive funds (82%) “underperformed” the S&P/NZX 50 Index over the 1-year period.

Sources: respective managers' published fact sheets and fund updates, and performance data published on www.investnow.co.nz, one-year returns to 31 August 2026. This table is provided to illustrate a methodological point. AN EXAMPLE: SIMPLICITY

Simplicity's NZ Share Fund returned 6.73% for the year to 31 August 2026, against 8.40% for the S&P/NZX 50 Index (Gross), an “underperformance” of almost 1.7%. Taken on its own, that looks like the kind of gap used as evidence that a fund, or its manager, isn't doing its job.

But Simplicity's own disclosed market index for this fund is the Morningstar New Zealand (total return) Index, including imputation credits, not the S&P/NZX 50. This tells us the fund is constructed, managed and benchmarked against a different, equally legitimate, measure of the New Zealand market.

In our view, describing this fund as having “underperformed” a benchmark it doesn't use, and was never designed to track, risks giving readers a misleading impression of how the fund is actually managed.

THE POINT, STATED PLAINLY

Analysing a fund's performance against a specific index or benchmark that it does not actually use tells us nothing about the success, or otherwise, of how that fund has been managed.

Furthermore, using a single index to assess a broad collection of funds that have a wide range of benchmarks doesn't produce meaningful information or insight. It certainly doesn't produce results that can be used to claim whether, collectively, a broad group of managers has over or underperformed.

The same is true regardless of whether we are considering active or passive funds. A passive fund not beating the S&P/NZX 50 doesn't mean it's a poor tracker. It may be tracking a different index entirely, as Simplicity is. In our sample, 73% “underperformed” a single benchmark for essentially the same reasons active managers might: differing index providers, differing constituent weightings, and differing mandates.

Demonstrating that a single benchmark can't be used to fairly judge a broad set of passive managers tracking different indices highlights why the same flawed single-benchmark approach can't be used to assess a broad range of active managers.

SOME KEY POINTS TO NOTE

We used one-year returns to 31 August 2026 to measure our sample of passive New Zealand equity funds, while SPIVA's “80% of funds underperformed” quote relates to its “New Zealand Equity Funds” category over the six months to 30 June 2026, a category we believe may in fact be Australasian in composition (see below). This is a different period and, on SPIVA's side, arguably a different fund universe. We used it because it was the return data we could readily obtain, not because it produces a more favourable comparison, and we want that limitation to be clear rather than buried in a footnote.

It is also worth noting that the underlying Morningstar data set SPIVA's “New Zealand Equity Funds” category uses appears to be Australasian in composition, not New Zealand-only, and includes funds that invest in Australian equities (like trans-Tasman equity funds). In our view, judging funds of this nature against a single benchmark composed entirely of New Zealand equities, the S&P/NZX 50, is flawed.

There is a further distortion worth flagging. Academic research we cited in our earlier “Index washing” article (Cremers, Fulkerson and Riley) found that SPIVA's US Scorecard counts every closed or merged fund as an underperformer, regardless of its actual results before closing, a bias that inflates reported underperformance over longer periods.

The New Zealand Scorecard appears to apply the same convention. Its own methodology notes state that funds which do not survive the measurement period are treated as underperformers, alongside funds that survived but failed to beat the benchmark. SPIVA's own data shows why this matters. Of the NZ-based global equity funds that existed at the start of the 15 years to 30 June 2026, 68% have closed or merged over that period. On SPIVA's own methodology, 68% of NZ-based global equity funds would be said to have “underperformed” over a 15-year period, even in a scenario where every single open fund outperformed over that same period. This clearly highlights the problem that Cremers et al identified. 

One issue we are still investigating is whether a fund that Morningstar reclassifies is treated as having “closed,” which would potential further distort the results.

THE ASK, UNCHANGED

This update doesn't change what we asked the FMA to test in our original briefing. Our ask is whether the Scorecard's headline claims, and the claims of anyone repeating them commercially, have a reasonable basis under the unsubstantiated representation standard in the fair dealing provisions of the Financial Markets Conduct Act. It adds a current, concrete example: S&P Dow Jones Indices' own new mid-year number, and a same-method test showing the identical mechanism can manufacture a headline “underperformance” statistic out of funds explicitly built to track the market.

We are not asking the FMA to accept our conclusion. We are asking it to assess whether SPIVA's mid-year 2026 headline claims, and this mirror-test result, both have a reasonable basis, and whether repeating either commercially, without the context set out here, amounts to fair dealing.

THIS IS NOT ABOUT THE ACTIVE-PASSIVE DEBATE

At Aurellan Asset Management we offer our clients both active and passive funds and solutions, and believe that both have a place within clients' portfolios. Our comments are not designed to defend active management, or to try and claim that active managers have, in general, added value.

Our focus in raising these issues is about data integrity. New Zealanders make real decisions, including KiwiSaver and retirement savings decisions, on the strength of headline statistics like these. When a statistic as widely repeated as “80% of funds underperformed” is built on a single-benchmark comparison that doesn't reflect the mandates of the funds it measures, the result can mislead investors regardless of which side of the active-passive debate it appears to support. That is the concern we are asking the FMA, and S&P Dow Jones Indices, to address, not who wins the active versus passive argument. A NOTE TO THE ARTICLE SPIVA mid-year 2026 figures are drawn from S&P Dow Jones Indices' published New Zealand Scorecard (spglobal.com/spdji). We recommend verifying the exact figures against the primary document before relying on them. They have not been independently audited against it here.

Statements about whether particular conduct breaches the fair dealing provisions or FMA guidance are the author's opinion, formed on the material set out here. They are not legal advice or a finding of any kind. The author is not a lawyer.

Sample and period: the 11-fund comparison uses funds selected for readily available public return data, not the full population of New Zealand passive/index equity funds, a limitation we are disclosing, not hiding. Fund returns are to 31 August 2026. SPIVA's mid-year figures are to 30 June 2026. The two-month gap between these periods is a genuine limitation of this comparison and should be read as such.

Fund data was sourced from respective managers' published fact sheets and fund updates, and www.investnow.co.nz. Simplicity's benchmark is as stated on its website.

Aurellan offers both actively managed and index-tracking strategies to its clients. Nothing here should be read as a general criticism of index investing, passive management, or any named manager. Past performance is not a reliable indicator of future performance.