Looking at the longer five-year period, 82.4% of large-cap managers, 87.2% of mid-cap managers and 93.8% of small-cap managers have underperformed their respective benchmarks. The numbers were even worse over the past 15-year period as 93.2% of large-cap managers, 94.4% of mid-cap managers and 94.4% of small-cap managers failed to outperform on a relative basis.
Meanwhile, demand for passive, index-based ETFs are on the rise, providing investors with a cheap way to capture exposure across a variety of investment themes and market segments.
Furthermore, years of Federal Reserve stimulus and loos monetary policies have impeded stock pickers’ ability to differentiate from specific picks, bolstering the appeal of passive funds that just buy the broad markets at a low cost.
According to Goldman Sachs, ETFs and mutual funds that passively track indices now make up 6% of the total American stock market, compared to 3% in 2009.
For more information on ETFs, visit our ETF Performance reports category.