It's incredibly rare that an active mutual fund manager will consistently outperform their fund's category benchmark over longer periods of time. The few that do are often not tied to a fixed investment mandate but have freedom to invest (or not) across multiple asset classes. Most active fund managers aren't really even trying to outperform their index benchmark. What the investing public doesn't fully understand is that mutual fund companies make their money from assets under management, not fund outperformance per se. If a manager simply "runs with the investing herd" and has reasonable fund performance similar to the market benchmark (index), investors will usually pour more money into the fund. That's good for the fund company because it will collect more management fees on those additional assets regardless of outperformance. It should come as no surprise, then, that neither the fund companies nor their managers want to jeopardize a sweet deal like that. Many active fund managers are like "closet indexers," running a portfolio just different enough from the index to be considered "active," but similar enough to the index that they're not going to get fired (or lose a lot of investors) if one or two of their investment picks blows up...or if their fund takes a dive when the broader market does too. Now, that's just mutual fund managers and their funds. That doesn't mean there's absolutely no value in a tactical (active) asset allocation approach at the portfolio level. An active asset allocation approach using "passive" investment vehicles can sometimes be the best of both worlds. But that's an extended topic for another time...and one which tends to generate a "heated religious debate" amongst the advisor community. Hope that helps. Larry
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