S&P Dow Jones Indices has published their updated U.S. Persistence Scorecard. A mere 2.2% of actively managed U.S. domestic equity funds in the top quartile for 12 months performance at the end of 2019 stayed ahead of three-quarters of their peers when measured two years later. Spurring their summary, “regardless of asset class or style focus, active management outperformance is typically short-lived, with few funds consistently outranking their peers or benchmarks.”
Simple chance would say the normal probability would be 50% of the funds the first year, then 25% the second. This mere 2% is worse odds than flipping a coin—so much so investors have better odds buying the losers, and selling the winners each year.
Another metric showing the perils of using active management.
Samuel serves as Senior Vice President, Chief Investment Officer for the Crews family of banks. He manages the individual investment holdings of his clients, including individuals, families, foundations, and institutions throughout the State of Florida. Samuel has been involved in banking since 1996 and has more than 20 years experience working in wealth management.
Investments are not a deposit or other obligation of, or guaranteed by, the bank, are not FDIC insured, not insured by any federal government agency, and are subject to investment risks, including possible loss of principal.
