This skepticism with regard to the added value of active management seems to have become the consensus in the academic literature and also among investors. This new paper1 examines the validity of this view by reviewing the literature on mutual fund performance over the last 20 years.
The authors conclude that the conventional wisdom judges active management too negatively, as there is, in fact, a lot of evidence for skill and value added from active management – also after accounting for the impact of fees and costs. Their arguments are backed by references to over 300 papers on this topic.
1Cremers, M., Fulkerson, J.A. and Riley, T.B., 2019, ‘Challenging the Conventional Wisdom on Active Management: A Review of the Past 20 Years of Academic Literature on Actively Managed Mutual Funds’, Financial Analysts Journal.