Something I've been pondering is the active managed vs passive funds discussion...
It seems entirely logical in the long run a total stock market fund will out perform almost all funds tracking that which require active management. There are not a lot of inefficiencies in say VTSAX. Or even large cap types of funds.
But what about more specific funds, such as a small cap growth funds. Or even international funds (especially stuff like emerging markets, etc).
Intuitively, it feels these types of funds at least could out perform their respective indices at a higher rate than the more broad/stable indices because they seem less efficient in general with higher turnover/etc.
However it seems most of the active vs passive funds information you read online is totally generalized and not segmented in any capacity. I'm curious if anyone has done any digging on this or if any information exists a bit more along these lines.
I've never looked at this and haven't seen any data driven approaches to it either. I can rationalize it, along the lines of your thinking, but I don't put too much weight on that =). If I ever come across anything I'll let you know but it is unlikely in my case because I'm unlikely to deviate from a 2 or 3 fund portfolio in the near term if at all.
To others, I think the question is specifically about relative value (risk vs. marginal gain) of active vs. passive management
within smaller sector or subset(s) of the market. I think that, for instance, the Callan table tells us that different subsets of the market will perform differently each year but doesn't address the topic of the thread. I'd add too that general discussion of active vs. passive overall in this thread is sort of highlighting the point that stepping one level deeper in the conversation on this topic is hard to do on the internet =).
I doubt this is the case, because I'm sure these sorts of things
have been looked at (just not by me), but you could squint at this and see the "passive > active" powerpoint-slide-level advice being meaningfully bad advice in a Simpsons paradox sense:
https://en.wikipedia.org/wiki/Simpson%27s_paradox.
For me I shy away from this conclusion because it seems like you logically walk yourself down this path to saying that smaller subsets of the market have higher fees in general (which is true) causally because they can generate > index returns (i.e. they outcompete) in these sectors as compared to larger ones. I don't like that argument because we also see basic SP500 fees with huge fees but not meaningfully better performance so I'm kind of of the opinion that it is not comparative advantage driving fees in any generalizeable sense...