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.
According to ProShares’ Leks Gerlak, CSM’s strategy seeks to consistently outperform the S&P 500 with similar levels of volatility. Since launching in July 2009, CSM has beaten the S&P 500 in 3-year, 5-year, and since-inception trailing periods. Additionally, CSM has outpaced the S&P 500 in 100% of rolling 5-year periods, and its record of besting the S&P 500 on a month-over-month basis surpasses 97% of all large-cap mutual funds and ETFs.
Gerlak explained what’s unique about CSM’s methodology and investment approach. CSM’s index is built on a disciplined investing approach that combines multiple well-established factors, offering less reliance on any one factor to achieve performance. The end result is a portfolio designed to turn incremental returns over time into consistent outperformance. The methodology was created in 2007 by recognized experts in quantitative finance – MIT professor Andrew Lo, PhD, and Pankaj Patel, CFA, now head of quantitative research at Cirrus Research.
CSM has achieved a rare feat of Morningstar 5-star ratings on a 3-year, 5-year and overall basis, placing it in the top decile of Large Blend mutual funds and ETFs for risk-adjusted performance. Gerlak says, “this fund has clearly demonstrated, from a number of different angles, that it can be the iron horse as a core large cap holding.”
For more information on CSM, visit ProShares.com.