For Canadian stock pickers, success in 2023 hinged almost entirely on whether they held Shopify Inc.

That was the finding from an S&P Global analysis of active fund managers in Canada last year, when the e-commerce company’s 119 per cent surge was the single biggest contributor to the S&P/TSX Composite Index’s total return of 12 per cent. 

In short, if a fund manager picked Shopify, she was more likely to beat the benchmark for Canadian equities. Most of the 71 actively managed Canadian equity funds did not, leading to 85 per cent of those tracked by S&P Global underperforming for the year, according to the S&P Indices Versus Active Canada Scorecard, released Thursday.

“Bright spots abounded, yet many active funds missed their moment in the sun,” S&P Global’s Joseph Nelesen said in an email. “Ultimately, strong index performance, positive skew among constituent returns and falling dispersion all contributed to conditions that were welcomed by many index-based investors, but which the vast majority of managers found difficult to beat.”

Shopify’s outsized contribution to the index’s gains underscores the challenges facing actively managed funds that track capitalization-weighted gauges. That’s because the distribution of returns in the stock market is bizarrely lopsided, according to academic research. Often, equity benchmarks are so reliant on gigantic gains in just a handful of stocks that missing them — as most managers do — consigns the majority to futility.

Last year, Shopify and software company Constellation Software Inc. were the top contributors to the S&P/TSX Composite Index’s rise. On the other side of the ledger, fertilizer producer Nutrien Ltd. was the biggest drag on the index last year, followed by First Quantum Minerals Ltd., which had to shutter a major copper mine in Panama.