A similar report is produced by Morningstar and shows similarly that performance of active funds is inferior to passive funds. The longer the time frame for evaluation with a sample that includes by definition only funds that survive shows particularly poor performance. Since the study includes all passive funds --many of which carry higher fees than the ETFs in the same categories --one would expect performance of the funds vs.ETFs would show even worse performance for the active funds.
This report compares passive funds to their actively managed peers in the same asset class.
Among the key findings:
In 2018 only 36% of active funds outperformed passive...down from 46% in 2017.
Over 10 years that number drops to only 24%,
Across all the equity sectors studied only two showed outperformance for active funds over 10 Years. Emerging markets (54.5%) and foreign small mid blend (70.6%). The latter category likely included a limited number of passive funds. Among domestic stock funds the "best" record was for US Small Cap Value at 33.3%. outperformance vs passive over 10 years/ US Large Cap Blend --the category where the most money is invested and the largest number of funds --showed only 10.9%.
In sum. the evidence shows that investors are far better off with passive rather than active funds particularly when measured against the most important benchmark-- long term performance.
But hope for active funds springs eternal. The WSJ reports on the growth of actively managed ETFS
moving active management to a new wrapper.
Passive funds still dominate industry, but a flurry of interest in active segment hints investors’ perceptions are shifting
These funds may have lower management fees than active funds but still higher than passive ETFS. They carry their own complications.Since they must disclose their holdings each day they run the risk of making public their strategies and holdings thus reducing what is seen as their comparative advantage. Funds run the risk of traders and others taking advantage of this information for short term profits.Additionally it is quite possible that these funds will run into the complication encountered with closed end mutual funds and to a lesser extent with passive ETFS; The fund and may trade at a premium or a discount to the actual holdings in the fund, It would be difficult for the market makers to consistently be able to deliver a portfolio matching fund holdings that unlike a passive fund would frequently, Several fund companies are petitioning the SEC to have active etfs without daily disclosure,
Judging by the record of actively managed mutual funds including last year's volatile markets it would be hard to give much credence to the claims expressed in the article :