[GRTV] 98% of active funds fail to outperform

100% of index funds fail to outperform If we break down the circa 122,000 active funds into styles etc, it’s easy to understand why up to 85% of them don’t perform at different stages of the investment cycle - but then it’s easier to overlook this fact (which requires effort).

I would flag that SPIVA reports are actually available on an asset class and style basis. https://www.spglobal.com/spdji/en/research-insights/spiva/ Equally, index funds can and do outperform - on a gross fund return vs gross benchmark return. e.g. Kernel Global 100 is gross 0.14% ahead of the benchmark, before fees, for the 12 months.

What I would like to see is the active managers in NZ for say KiwiSaver benchmarked against the passive options on an after tax, after fees and risk-adjusted basis and then report this to the market. I believe the results would be overwhelming that on a risk-adjusted basis, some active managers are not adding significant value, or enough value to justify the additional risk they take to generate alpha. It would also be good to run stats to show how much of the alpha (if any) was luck or good management.

Dean is absolutely right on index funds sometimes delivering greater returns than the indices they track Sometimes due to sampling/optimisation (i.e. not buying everything), sometimes due to favourable tax relative to the index (which always assumes the worst), sometimes due to 'efficient' portfolio management techniques (sec lending, clever trading, front-running index changes etc.). Re: SPIVA, no doubt great global reports. Have done several events with Tim over the years and he is excellent. The beef with SPIVA, if there is one, is that they use S&P only indices. So they are comparing results of funds managed vs. say, the MSCI ACWI, vs. their global index, say the S&P Global BMI... or the S&P UK Index when everyone uses the FTSE 100 or All Shares. This is all at the margins, though... that retail mutual funds in the aggregate find if tough to outperform indices/passive alternative after fees... this is surely beyond question. That does not mean that there aren't managers who have added value...