Active Managers: The (Horror) Show Goes On

This from S&P:

“The belief that bear markets strongly favor active management is a myth,” says Srikant Dash, Global Head of Research & Design at Standard & Poor’s. “A majority of active funds in each of the nine domestic equity style boxes were outperformed by indices during the down markets of 2008. The bear market of 2000 to 2002 showed similar outcomes.”

Right: Over the five year market cycle from 2004 to 2008, the S&P 500 outperformed 71.9% of actively managed large cap funds, the S&P MidCap 400 outperformed 75.9% of mid cap funds, and the S&P SmallCap 600 outperformed 85.5% of small cap funds. These results are similar to that of the previous five year cycle from 1999 to 2003.

http://www.aleablog.com/active-managers-the-horror-show-goes-on/


http://www2.standardandpoors.com/spf/pdf/index/042009_SPIVA-PR.pdf

 

You have to wonder if some actively managed funds are merely a scam to generate commission and slippage dollars for the manager and his brokers.

 

Isn´t it all about "slippage" ?

 

Just eyeballing the numbers in the lowest level reports (several links down in the S&P site), it seems to me that the active managers may have actually outperformed their respective indices on a 5-year basis, by a small margin, BEFORE fees. But no details of the fees seem to be aggregated in the report, so I am really just guessing here.