Investors would be wrong to assume managers have an advantage in styles that are underperforming without considering the purity phenomena. What goes around comes around. Styles that underperformed in the past will reverse at some point and active managers will underperform. It could take one year or several years before a regression to the mean occurs, but it will happen.

Active managers have such a difficult time beating their benchmarks long-term in every style. The reason is simple math; it’s a zero-sum game. There’s only a finite amount of money that can be earned in the markets each year. When one active investor extracts more than his or her fair share, another one earns less – and this is before costs. Since no one invests for free, investment cost ultimately causes the average active fund in every category and style to underperform.

The lesson behind the SPIVA® U.S. Scorecard and its sister publication, SPIVA® Persistence Scorecard is that it’s darn hard to beat the markets – every market. This makes low-cost index funds and exchange-traded funds (ETFs) a wise choice.

For more information on this topic, I will be speaking at S&P DJI’s upcoming webinar, “Putting SPIVA to Practical Use in Portfolio Management” on May 12.

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