Active Mutual Fund Management Still Worthless?

Does recent research on active mutual fund performance challenge conventional wisdom that: (1) the average fund underperforms passive benchmarks on a net basis; and, (2) individual fund outperformance does not persist. In their September 2018 paper entitled “Challenging the Conventional Wisdom on Active Management: A Review of the Past 20 Years of Academic Literature on Actively Managed Mutual Funds”, Martijn Cremers, Jon Fulkerson and Timothy Riley review academic research on active mutual funds from the last 20 years to assess the degree to which it supports this conventional wisdom. They focus on U.S. equity mutual funds but also consider bond funds, hybrid stock-bond funds, socially responsible funds, target date funds, real estate investment trust (REIT) funds, sector funds and international funds. Based on this research, they conclude that: (more…)