Vanguard's Patent About to Expire: What's Next for Active ETFs?
Justin Kuepper
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Vanguard's patent on adding an ETF share class to mutual funds will expire...
Now, thanks to a recent study by Jeffrey Ptak, Morningstar’s director of global manager research, we possess further evidence that the likelihood of generating alpha not only has been declining, it’s collapsing. Consider the following.
In his new study, presented in the February/March 2016 issue of Morningstar magazine, Ptak set out to determine how many U.S. equity funds went on to beat their relevant index fund benchmark on an after-tax basis over the 10-year period ending October 2015.
Ptak, who assumes that the investor sells at the end of the period, found that out of the 4,993 funds he studied, only 205 beat their benchmark index fund on an after-tax basis. That’s just 4.1%. On a relative basis, 70% fewer funds outperformed on an after-tax basis than Arnott, Berkin and Ye found to be the case in their study, done just 15 years earlier. And what’s more, 10% fewer did so on an absolute basis.
Ptak also found that it didn’t matter which asset class he looked at; only a very small percentage of active funds outperformed on an after-tax basis. Keep this in mind the next time you hear arguments about active management outperforming in supposedly inefficient asset classes (such as small-cap stocks).
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Justin Kuepper
|
Vanguard's patent on adding an ETF share class to mutual funds will expire...
Sam Bourgi
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Regarding portfolio allocation, the investment manager PIMCO believes bonds are alluring again thanks...
Kristan Wojnar, RCC™
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Let’s dive into the business building ideas of social media planning, cultivating new...
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Justin Kuepper
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Let's take a closer look at how ESG investments have outperformed during the...
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Daniel Cross
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Sam Bourgi
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The phrase ‘bear market’ has been thrown around a lot lately, but it...
Now, thanks to a recent study by Jeffrey Ptak, Morningstar’s director of global manager research, we possess further evidence that the likelihood of generating alpha not only has been declining, it’s collapsing. Consider the following.
In his new study, presented in the February/March 2016 issue of Morningstar magazine, Ptak set out to determine how many U.S. equity funds went on to beat their relevant index fund benchmark on an after-tax basis over the 10-year period ending October 2015.
Ptak, who assumes that the investor sells at the end of the period, found that out of the 4,993 funds he studied, only 205 beat their benchmark index fund on an after-tax basis. That’s just 4.1%. On a relative basis, 70% fewer funds outperformed on an after-tax basis than Arnott, Berkin and Ye found to be the case in their study, done just 15 years earlier. And what’s more, 10% fewer did so on an absolute basis.
Ptak also found that it didn’t matter which asset class he looked at; only a very small percentage of active funds outperformed on an after-tax basis. Keep this in mind the next time you hear arguments about active management outperforming in supposedly inefficient asset classes (such as small-cap stocks).
Receive email updates about best performers, news, CE accredited webcasts and more.
Justin Kuepper
|
Vanguard's patent on adding an ETF share class to mutual funds will expire...
Sam Bourgi
|
Regarding portfolio allocation, the investment manager PIMCO believes bonds are alluring again thanks...
Kristan Wojnar, RCC™
|
Let’s dive into the business building ideas of social media planning, cultivating new...
Mutual Fund Education
Justin Kuepper
|
Let's take a closer look at how ESG investments have outperformed during the...
Mutual Fund Education
Daniel Cross
|
While CITs and mutual funds share many similarities, there are some key differences...
Mutual Fund Education
Sam Bourgi
|
The phrase ‘bear market’ has been thrown around a lot lately, but it...