It’s the triumph of indexing: Fund managers continue to trail their benchmarks.
Long-term, the numbers were not much better in other categories like small-cap stocks or fixed income: “Over long-term horizons, 80 percent or more of active managers across all categories underperformed their respective benchmarks,” the report concluded.
Looking at managers’ overall record last year versus the broader S&P 1500 Composite, 2018 was the fourth-worst year for stock managers since 2001.
Critically, the study adjusts for “survivorship bias.” Many funds are liquidated because of poor performance, so the survivors give the appearance the overall group is doing better than it really is.
“The disappearance of funds remains meaningful,” the report notes. Over 15 years, 57 percent of domestic equity funds and 52 percent of all fixed income funds were merged or liquidated.