Active PMs are generating increasingly passive results. That's the conclusion of research highlighted by David Blanchett in a four-page article in IndexUniverse.

The trade pub notes that, from January 1991 to December 2011, "the average correlation [with benchmark indexes] for actively managed domestic equity mutual funds has been increasing," to a whopping 98.2 percent for gross returns. That corresponds with a downward shift in tracking error of active funds' returns from their respective benchmarks and a downward shift in the standard deviation (i.e. the variation) of active funds' returns.

IndexUniverse wonders if the increasing correlation of individual stock returns, thanks to more and more investors buying stocks in bulk via passive investments, is driving this shift by making it harder for active PMs to outperform their benchmarks. 

Edited by: Neil Anderson, Managing Editor


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