Topic_17_E1 - Topic 17 Exercise 1 Portfolio Management and...

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Topic 17, Exercise 1 Portfolio Management and Performance Evaluation The 6% Factor: Which Fund Managers Will Outperform Index Funds? Many professionals and academics have suggested that the rewards and benefits of having active portfolio management do not cover the costs associated with securing that active management. This would lead to the conclusion that indexing may be the preferred method of investing. It is hard to beat an efficient market. “The 6% Factor: Which Fund Managers Will Outperform Index Funds?” addresses the issue of consistent success in fund manager performance. After reading this article, discuss the following questions: 1. What is the 6% factor? Index funds, which invest in Standard & Poor’s list of 500 large corporations, do better than actively-managed funds. In fact, just 6% of those professionally managed funds have, over the past five years, outperformed funds that are pegged to the S & P 500.
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