Fairval

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Active funds no good?

Posted by fairval on May 23, 2008

So says a note by Benchmark capital. The graph does support the contention. But the underperformance is only from the Jan’08 period, where market corrected 30% or so, and most funds got rogered. Ideally, active funds should not underperform that much, but this period of correction was sharp, with most mid caps correcting 50% or more. Most active funds do tend to overshoot on both sides – outperform in a bull run, and underperform in a correction.
This graph apparently is a 3year CAGR. The recent data does look rather bad. -5% to the index as a 3 year CAGR is rather large (if the date is really true). There are various ways to massage data to prove a point.

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