Video: What proportion of actively managed funds consistently beat the market?

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Professor Keith Cuthbertson

The fourth in our regular series of videos from FWB TV is now up at their site and at Findependence.TV.

The topic is that perennial one beloved of believers in passively managed index funds or ETFs: the proportion of actively managed funds that beat the market and do so consistently.

But as the preamble below the 3.5-minute video points out:

The funds you tend to you see advertised or mentioned in the media are generally active ones too and yet independent and peer reviewed research has consistency shown that very few actively managed funds are able to be low cost passive ones with any degree of persistence.

The interview is with Professor Keith Cuthbertson of the Cass Business School. He says research shows 70% of these funds are “closet” index trackers; in 20% of cases “your grandmother could do better” and that even the 5% of truly skilled managers are “harder to find than the Higg’s Boson.”

Attempting to pick such funds amounts to a gamble, he says, although it seems plenty of investors like to gamble.

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