These Active Managers Actually Beat the Market, Over Time

A new survey finds that large-cap value managers solidly beat their benchmarks over the past decade, despite lackluster results over shorter time frames.

Wilshire Associates Incorporated Headquarters, Santa Monica, California  Courtesy Google Maps

Wilshire Associates Incorporated Headquarters, Santa Monica, California Courtesy Google Maps

As the active versus passive debate rages on, a new report shows that the majority of active large-cap value managers have beaten benchmarks over the past ten years.

The report, released March 1 by the investment advisory firm Wilshire Consulting, shows that while many actively managed funds do not beat indexes, those active managers that invest in large-cap value companies were able to outperform the index — net of fees — by 1.13 percent on average over the past decade. It also shows that “an impressive” 84 percent of the segment outperformed indexes on a gross-of-fee basis.

The report comes at a time when many investors have been allocating to passively managed funds as a way to cut costs and drive higher returns. But the Wilshire research shows that some active strategies have paid off, at least over time.

“Despite lackluster results over the past three and five-year periods, large value managers have performed well over the past ten years,” according to Wilshire.

The data in Wilshire’s report was culled from its database of more than 11,000 separate account products, for which investment managers fill out quantitative and qualitative surveys on a regular basis. The data was obtained through the end of December 2017, according to Wilshire.

Over a ten-year period, the large-cap value managers produced a median excess return of 1.18 percent.


This is compared with large-cap core managers, who over the past ten years have trailed their benchmark by 0.01 percent net of fees, on average, and produced a median excess return of just 0.09 percent over the same period. Wilshire said the ten-year average and median excess returns for this strategy “are consistent with our expectations that the ‘average’ active manager will deliver index-like gross-of-fee returns over the long-term.”

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During the past year, large-cap value managers have returned 0.29 percent above the benchmark net of fees, on average, according to the report. Over the past three years, these managers have trailed it by 0.36 percent on average and by 0.22 percent over the past five, the report shows.

Wilshire, according to the report, expects active managers on the whole to perform on par with indexes, and thus to not be worth their fees.

“Once accounting for fees, we would expect average active results to trail passive indexes,” according to the report. “While much of the quantitative universe data contained within this report support that general expectation, we do not view this as an indictment against the pursuit of active management.”

According to Wilshire, this data underscores the importance of choosing wisely when it comes to active management selection.