When looking at the broad industry, it has been extremely challenging for active managers in the U.S. large cap space to outperform the S&P 500.
In fact, over 5-, 10- and 15-year time periods, about 90-95 percent of active managers have underperformed the S&P 500.
Consistent outperformance is even rarer, with very few active managers delivering above-average returns over multiple time periods, according to the S&P Persistence Scorecard. Out of 557 domestic equity funds that placed in the top quartile in March 2016, only 2.33% managed to hang on by the end of March 2018.
When it comes to the active versus passive debate, one of the key measurements of successful active management lies in the ability of a manager or a strategy to deliver above-average returns consistently over multiple periods. Demonstrating the ability to outperform peers repeatedly is the one way to differentiate a manager’s luck from skill.
Investors who have been disappointed with traditional active management can look to an ETF such as the ProShares Large Cap Core Plus (CSM), which has an impressive performance track record and is one of the longest tenured smart beta, multi-factor ETFs.