Who does Active Management Well

[kjc466]

I’m doing research into active Management and I’ve noticed that so many firms tout their performance that it all seems the same.  Does Anyone know what the difference is between different active management investment firms and which ones tend to do well (and why?)

[Cwadda]

Active management firms, as in the people that personally manage your money or the mutual fund performance? If you're looking to compare different actively managed mutual funds you can plug them in on morningstar and get your results pretty quickly.

[uwp]

Most research I've seen regarding active management shows that the firms that have (some) success have lower than average fees, and higher than average management fund ownership (the fund managers have a good chunk of their own money in the fund).

[smallstache]

Active management managers do well. Active management investors...not so much.

[FINate]

Active management managers do well. Active management investors...not so much.

Even active management managers don't do very well relative to the total market, especially once fees and Survivorship Bias are taken into consideration. Survivorship Bias (https://www.ifa.com/articles/survivorship_bias_things_are_not_as_good_as_they_look/) is where long-term stats for actively managed funds only include funds that have survivied. Funds that underperform are quietly shut down and swept under the rug, which makes the numbers for actively managed funds appear better than they actually are.

[uwp]

Even active management managers don't do very well relative to the total market,

I think he was referring to the managers doing well at making sweet cash money from the fees.

[PizzaSteve]

With respect to your why question, the funds that do well tend to:

* Have below average to lower fees (no suprise).
* Focus on asset classes where information and research can matter (like small cap, narrow international regions, specific industry, junk bonds)
* Dont churn portfolios much, generating excess costs.
* Be large enough to take advange of cost advantages from scale, but not so large that their strategy is diluted.  A group like Vanguard can offer good costs by sharing resources with passive funds and limiting size of active specialized funds.
* Have a clear strategy that makes sense (e.g. Indonesian tech fund, your local researchers actually meet with and review indonesian companies management, your team closely inspect the books, clearly post in prospectus the fund is an indonesian growth stock play, move out of positions if a portfolio position is no longer attractive...but only if fundamentals changed, etc.
* Get lucky with one or more of their picks or their chosen asset class.
* Not be greedy crooks.

[Travis]

^^^^

...and odds are you won't find them on a Google search.  The famous fund managers that you might have heard of from the last few decades were doing spectacular things when nobody knew who they were.  Once they became famous and people started throwing money at them by the billions their strategies fell apart and/or their luck simply ran out.

[smallstache]

Even active management managers don't do very well relative to the total market,

I think he was referring to the managers doing well at making sweet cash money from the fees.

Yep

[chasesfish]

I own almost $100,000 of Vanguard's Wellington Fund.  Its an actively managed mutual fund and I think active management provides some value in bond funds and when you get into wealth preservation mode.  Unfortunately its closed to new investors, its a nice 60/40 bond/stock fund and admiral shares have a 0.16% expense ratio.

I am helping a retired relative and moved a bunch of their stuff into Vanguard's Wellesley Income Fund.  Its the inverse (65% Bond, 35% stocks) and has done well generating a slow and steady return.

[CorpRaider]

Vanguard.  They have a number of good ones, including the primecap affiliated funds.  I think most of those are closed to new investment.  VASVX and VDIGX have put up good numbers in the past. (I haven't checked lately).  Most of their active bond funds probably beat the AGG, but the AGG kind of sucks.  Costs matter. 

[Car Jack]

Old timers from the old Morningstar hard core group (now Bogleheads) seem very keen on Wellington and Wellsley from Vanguard.

With other firms, you have to look around the tap dancing, smoke and mirrors.  I've seen so many fund managers comparing their returns to the S&P 500, touting their performance.  Problem is....they ignore dividends from the S&P.  When you do a comparison with dividends included, the active fund badly underperforms.