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Morningstar Unveils Active vs. Passive Performance Comparison Tool
I am surprised by how well active funds performed over the 10 year time period through 2014 in some categories. Here is one of the charts from the M* link:
It is advantageous to individual investors that Morningstar has entered the active/passive mutual fund management scoring ballgame. With their huge data collecting machinery, Morningstar is a formidable competitor to Standard and Poors’ SPIVA semi-annual reports.
Although each firm uses slightly different scoring specifics, their end product probabilities of active fund managers outdistancing Passive benchmarks will likely be very similar. The direct competition between these giant firms in the industry should promote better and more exhaustive studies.
In case you haven’t seen the latest SPIVA report, here is a Link that allows a download of the June, 2015 version of it:
Numbers change, the data end dates differ, but the bottom-line S&P conclusions show the same trends that Morningstar finds. Active fund managers travel a hard, uphill road.
The Table that davfor referenced illuminates active fund managers challenge to overcome their trading costs and their fees. Active fund managers fail to outperform their benchmarks in most categories. They do manage to mostly jump (over 50%) this daunting hurdle in all sizes of US Value equities, in the Foreign fund category, and in the Intermediate-Term Bond grouping.
If an investor wants a mix of both actively and passively managed components in his portfolio, these data signal the category options that are most likely to be successful. Portfolios do better when they tilt towards the better odds weightings.
For a multi-component portfolio, it is a difficult task to assemble a team of active managers who can increase the portfolio’s long-term composite return 1% to 2% annually above reasonable benchmarks. The referenced Table illustrates the dangers when high priced funds are selected. The returns disparity between the high cost funds and the low cost funds is truly shocking.
The data clearly reinforces John Bogle’s wisdom that costs matter. The Table once again demonstrates that costs just don’t matter, costs matter greatly. That is the single most important takeaway from the Morningstar Table provided in this exchange.
Comments
It is advantageous to individual investors that Morningstar has entered the active/passive mutual fund management scoring ballgame. With their huge data collecting machinery, Morningstar is a formidable competitor to Standard and Poors’ SPIVA semi-annual reports.
Although each firm uses slightly different scoring specifics, their end product probabilities of active fund managers outdistancing Passive benchmarks will likely be very similar. The direct competition between these giant firms in the industry should promote better and more exhaustive studies.
In case you haven’t seen the latest SPIVA report, here is a Link that allows a download of the June, 2015 version of it:
https://us.spindices.com/resource-center/thought-leadership/research/
Numbers change, the data end dates differ, but the bottom-line S&P conclusions show the same trends that Morningstar finds. Active fund managers travel a hard, uphill road.
The Table that davfor referenced illuminates active fund managers challenge to overcome their trading costs and their fees. Active fund managers fail to outperform their benchmarks in most categories. They do manage to mostly jump (over 50%) this daunting hurdle in all sizes of US Value equities, in the Foreign fund category, and in the Intermediate-Term Bond grouping.
If an investor wants a mix of both actively and passively managed components in his portfolio, these data signal the category options that are most likely to be successful. Portfolios do better when they tilt towards the better odds weightings.
For a multi-component portfolio, it is a difficult task to assemble a team of active managers who can increase the portfolio’s long-term composite return 1% to 2% annually above reasonable benchmarks. The referenced Table illustrates the dangers when high priced funds are selected. The returns disparity between the high cost funds and the low cost funds is truly shocking.
The data clearly reinforces John Bogle’s wisdom that costs matter. The Table once again demonstrates that costs just don’t matter, costs matter greatly. That is the single most important takeaway from the Morningstar Table provided in this exchange.
Best Wishes.