OhNoNotimAgain wrote:Indeed.
If you think about it an active fund manager works full time for 8 hours a day, 200 days a year. Over 3 years that is almost 5,000 man hours of work and since in the UK All Companies Sector alone there are 200 active funds that is the best part of one million man hours. Yet over that period passive funds have beaten 80% of the competition and the time needed to run a passive fund can be as a little as a few hours a month.
Most of the man hours spent in managing active funds is in activity that essentially cancels out on a net basis so is absolutely valueless, even worse it destroys value for the investor.
It is has taken a long time for the industrial financial equivalent of the spinning jenny to challenge the labour intensive cottage industry of fund management but the economics are undeniable.
I think it is true to say that most cap weighted funds Index beat the average active fund.
I have not seen much evidence to suggest that algorithmic funds that are not cap weighted do so.
Whether or not you consider active management valueless depends on the importance you place on price discovery and the allocation of capital in the capitalist system.