“An inverse relationship generally exists between the measurement time horizon and the ability of top-performing funds to maintain their status,” the analysts said. “It is worth noting that no large-cap, mid-cap, or small-cap funds managed to remain in the top quartile at the end of the five-year measurement period. This figure paints a negative picture regarding long-term persistence in mutual fund returns.”
The scorecard findings suggest that over short periods, the majority of active fund outperformances may have more to do with luck as active managers’ performances typically fall off over extended periods and even underperform given enough time.
Consequently, long-term investors who want a cheap and efficient way to gain exposure to broad markets should consider a passive, index-based ETF as a safe bet.
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