But the latest report on active management performance, in the closely watched SPIVA U.S. Scorecard from S&P, paints an even bleaker picture over the long term.
For the first time, the scorecard tracked 15-year performance to capture what it considers a “complete market cycle.”
In that period, 92.2 percent of large-cap managers missed their marks, while the number was 95.4 percent for mid-caps and 93.2 percent for small-caps. It’s probably no wonder, then, that more than 58 percent of U.S. equity funds either folded or merged during the 15-year time frame.
To be sure, the scorecard is sometimes discounted because S&P sells index products. However, the underperformance of active jibes at least in a broad sense with measures from other sources on Wall Street.
JPMorgan Chase, for instance, reported that active managers actually have gotten off to a stronger start in 2017, but the beat rate for large-cap is barely better than half at 52 percent.
Advocates of active management stress that investors need to know what factors to look for in managers, including performance, strategy and market conditions.
Bob Doll, senior portfolio manager at Nuveen Asset Management, said market conditions are conducive this year for his side of Wall Street. Among them: the likelihood that small-cap stocks will outperform this year, that international will outperform the U.S., and that value stocks are topping growth, by a wide margin.
“Among these factors are the tailwinds that enable active managers, given their portfolio construction, to win, and we’re heading into that environment,” he said in a video presentation for clients. “So this should be a good year.”
