Don't Write Off Active Management

Active managers must overcome their cost disadvantage against index funds but many outperform their passive peers in areas such as emerging markets

John Rekenthaler 12 September, 2018 | 10:39AM

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Vanguard’s recent short paper debunked the idea that active management performs better in certain market segments as a myth. But that claim is untrue: over any time period, some categories of active funds fare better than others.

Not only do some categories of active funds outperform others over a single time period but extending those studies also uncovers some persistence. Active emerging markets funds routinely give indexers a stronger fight than do large-blend US stock funds. Small-company stock funds have more relative winners than do blue-chip funds.

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About Author

John Rekenthaler

John Rekenthaler  is vice president of research for Morningstar.

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