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How investors can avoid an overlooked pitfall of investment management

WEEKLY MARKET COMMENTARY  | 

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In “The next chapter in the active versus passive management debate,” a white paper published in 2015, DiMeo Schneider & Associates evaluated the persistency of top quartile mutual funds in 17 categories during the 10-year period ended Dec. 31, 2014. The results would have been eye opening had it not been for previous research from 2007, 2010 and 2012. Despite the vastly different market environments during the prior periods, the advisement has been consistent. Some statistics from the report included:

  • 92 percent: The percentage of top quartile mutual funds unable to avoid the bottom half of their peer groups at least one three-year period between 2005 and 2014.
  • 56 percent: The percentage of top quartile mutual funds unable to avoid the bottom half during a five-year period between 2005 and 2014.

When allocating capital to active managers within your investment portfolio, the question is not what to do if your manager underperforms but when. The failure to address this is key to what John West, CFA at Research Affiliates calls “the biggest failure in investment management,” the negative gap between fund total returns and investor returns. Read our full commentary for more.

 
Information in this document was prepared by DiMeo Schneider & Associates, L.L.C. and although information in this document has been obtained from sources believed to be reliable, RSM US Wealth Management LLC, DiMeo Schneider & Associates, L.L.C. and their respective affiliates do not guarantee its accuracy, completeness or reliability and are not responsible or liable for any direct, indirect or consequential losses from its use. Any such information may be incomplete or condensed and is subject to change without notice. The Frontier EngineerTM is a registered trademark of DiMeo Schneider & Associates, L.L.C.

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