A recent report from S&P Dow Jones Indices reveals that the majority of actively managed Canadian equity funds underperformed their benchmarks during the first half of 2026. According to the S&P Indices Versus Active (SPIVA) Canada Mid-Year 2026 Scorecard, 87 percent of these funds failed to exceed the returns of the S&P/TSX Composite Index, which is Canada’s broadest equity benchmark. This underperformance rate notably exceeds the 10-year average of 81.8 percent.

During the first six months of the year, actively managed Canadian equity funds delivered an average return of 8.8 percent on both equal-weighted and asset-weighted bases. In contrast, the S&P/TSX Composite posted a gain of 11.2 percent over the same period. The report attributes part of the challenge faced by active managers to increased dispersion—the widening gap between the best and worst performing stocks—which theoretically may provide opportunities for stock pickers but also raises risks when funds hold poorly performing securities.

Joseph Nelesen, a strategist at S&P Dow Jones Indices, noted that the mathematical challenge of consistently picking winning stocks, especially when they are a minority, is compounded by fees charged by active managers, making it “almost mathematically impossible” for more than half of funds to outperform net of fees. The SPIVA scorecard assesses fund performance after deducting such fees.

A related factor contributing to the underperformance is the high concentration in major equity indexes. The top 10 companies account for nearly 40 percent of both the S&P 500 and the S&P/TSX Composite, with the top five securities contributing increasing shares of returns in the Canadian benchmark—23 percent in 2024, 28 percent in 2025, and about 33 percent in the first half of 2026. Nelesen emphasized that many active managers tend to underweight these large, leading stocks, which can negatively impact performance during market rallies dominated by those companies.

Jonathan Lo, portfolio manager at Ninepoint Partners in Toronto, described the current environment as a “really tricky market” for active managers, in part due to the fees they charge and the challenges posed by market leadership trends. He suggested that investors may still find value in “differentiated portfolios” managed by active managers willing to adjust their holdings as market dynamics evolve, rather than simply mirroring index weights.

Comparatively, active large-cap U.S. equity funds also faced underperformance, though to a lesser degree, with 67 percent lagging the S&P 500 during the first half of 2026, according to a separate S&P Dow Jones report.

Looking ahead, Nelesen remarked that the second half of the year could offer insights into whether Canadian active managers can improve their results as market conditions continue to shift.