Do Active Funds Beat Index Funds in Canada? The SPIVA Data
No, most Canadian active funds lose to their index, and the gap grows the longer you wait.
The Short Answer
Most active funds in Canada trail their benchmark, and over 10 to 15 years almost all of them do.
If you came here for a yes or no, here it is: no. Active funds do not beat index funds in Canada often enough to justify their cost. The evidence comes from S&P’s SPIVA Canada scorecard, which has tracked this question for years and keeps landing on the same answer.
Some active funds do win in any given year. That part is true. But picking next decade’s winner today is the hard part, and the data says you will likely pick wrong. The cheaper, simpler move is to own the whole market and keep the fees.
Over 10 years, roughly 9 in 10 Canadian equity funds and about 19 in 20 global equity funds trailed their benchmark. Over 15 years, the numbers get worse. Index funds like XEQT win mostly because they cost less.
What the SPIVA Canada Scorecard Shows
SPIVA compares active funds with a matching index and counts how many fall behind.
SPIVA stands for S&P Indices Versus Active. Twice a year, S&P Dow Jones Indices checks how Canadian-domiciled active funds performed against the index that matches their mandate. Canadian equity funds get measured against the S&P/TSX Composite. Global equity funds get measured against a global index.
The table below shows the share of funds that underperformed their benchmark. The figures are rounded and approximate. Scorecard numbers shift slightly with each release, so check the latest edition at spglobal.com before you quote them anywhere.
| Fund category | 5 years | 10 years | 15 years |
|---|---|---|---|
| Canadian equity | About 85% | About 88% | About 93% |
| Global equity | About 90% | About 95% | About 97% |
Notice the direction. The longer the time frame, the more funds fall behind. A fund that looks fine over 3 years often looks mediocre over 10 and poor over 15. Time does not rescue active managers. It exposes them.
These percentages use the fund returns after fees. That matters, because you keep your returns after fees, not before them.
Why Active Funds Lose
It is not that managers are dumb. The math works against them.
Active managers are smart, well-paid people. They still lose, for three plain reasons.
First, they compete against each other. Every stock trade has a professional on the other side, so the average active dollar earns the market return before costs. After costs, it earns less. That is simple arithmetic, not opinion.
Second, they charge more. A typical Canadian active equity mutual fund charges an MER near 2%. XEQT charges about 0.20%. A manager has to beat the market by nearly 2 percentage points every year just to tie you with the index.
Third, they trade more. More trading means more hidden costs, and it often means more taxable distributions in a non-registered account. Index funds trade rarely, so they leak less.
Survivorship Bias in Plain Language
The funds you can see today are the winners. The losers quietly vanish.
Imagine 100 fund managers each start a fund. After 10 years, 30 of them did so badly that their company shut them down or merged them into a better-looking fund. The 70 survivors get marketed. Their ads show strong 10-year records.
That is survivorship bias. If you only look at funds still alive, active management looks better than it is. The failures disappear from the record, so the average looks inflated.
SPIVA fixes this. It tracks every fund that existed at the start of the period, including the ones that closed. When a fund dies, SPIVA still counts it as a miss. That is why SPIVA numbers look worse than the glossy fund brochure at your bank branch. The scorecard shows what really happened to the whole group, not just the survivors.
When a bank shows you a fund with a great 10-year record, ask how many sister funds closed along the way. You will rarely get an answer.
The Fee Drag in Dollars
A 1.8 point fee gap sounds small. Over 25 years, it eats more than a third of your money.
Here is a simple example. You invest $100,000 and leave it alone for 25 years. Assume the market returns 6% a year before fees. We compare an index fund with a 0.20% MER against an active fund with a 2.0% MER. We also assume, generously, that the active manager matches the market before fees.
| Option | MER | Net return | Value after 25 years |
|---|---|---|---|
| Index fund like XEQT | About 0.20% | About 5.80% | About $409,300 |
| Typical active fund | About 2.0% | About 4.0% | About $266,600 |
| Cost of the fee gap | About $142,700 |
That $142,700 difference is money that left your pocket and landed in the fund company’s. You took the same market risk. You got a smaller result. Add regular monthly contributions and the gap grows even larger.
Fees also interact with taxes. Where you hold your fund and how its distributions are taxed changes what you keep. For a province-by-province look at what you actually keep, see the after-tax guide.
What About the Funds That Win?
A small group of active funds does beat the index. Finding them in advance is the problem.
Let’s be fair. In Canadian equity, 5 to 15 percent of funds beat the index over long periods. A few managers earn that edge through skill. Many others earn it through luck, and luck does not repeat.
SPIVA also publishes persistence data in its US reports, and the finding is consistent: top-performing funds in one period rarely stay on top in the next. Last decade’s star often becomes this decade’s average. Past performance does not reliably predict future winners.
So you have two options. You can try to pick one of the 5 to 15 percent in advance, knowing you will pay higher fees while you wait to find out. Or you can buy the whole market for 0.20% and collect the average return minus a tiny cost. The second option beats most of the first group by design.
Active funds can make sense in narrow cases, like specialized strategies or certain bond mandates. For a core stock holding in a TFSA or RRSP, the odds favour the index.
The Simple Path
One all-in-one ETF gives you global stocks, rebalancing and a tiny fee in a single ticker.
If the data convinces you, the next step is short. Pick a low-cost, all-in-one ETF. XEQT holds thousands of stocks across Canada, the US, developed markets and emerging markets. It rebalances itself. You do not research managers, watch headlines or second-guess a star pick.
You do not need to be right about which manager will win. You only need to stop paying for a bet that loses most of the time. Open an account, buy, automate your contributions and let time do the work.
If you want the foundations first, read our pillar guide on index funds in Canada. It explains what an index fund is, how it works and how to buy one.
Stop Paying for a Bet That Loses
Open a Wealthsimple account, buy XEQT and keep more of your returns. It takes a few minutes.
Open Wealthsimple → Get $25 FreeThis article is for general informational purposes only and does not constitute personalized financial or investment advice. XEQT is a product of BlackRock/iShares. Not financial advice. This site maintains an affiliate relationship with Wealthsimple.