Investment luminaries from Warren Buffett to Jack Bogle have sung the praises of index funds over actively-managed stock funds. And new data from Bank of America will show you why.
Only 18 percent of U.S. actively-managed, large-cap stock funds outperformed the Russell 1000 index of large-cap stocks for the first 10 months of the year, according to BofA, the Financial Times reports.
That was the worst showing for active managers in a decade. Since BofA began tracking the numbers in 2003, only once have more than 50 percent of active managers beaten the index—in 2007.
"It has been an abysmal year," BofA chief equity strategist Savita Subramanian told the FT.
"Large-cap mutual funds have a chronic bias towards smaller stocks, since it is hard to overweight the very largest stocks. But these [large] stocks have actually outperformed by a pretty large margin this year. The smaller-cap bias has hurt quite a bit."
Active managers also suffered as widely-held technology and energy stocks hit the skids last month.
It probably won't shock you, then, to learn that actively managed U.S.-stock funds have suffered an outflow of $70 billion for the year through September, according to Morningstar estimates.
"Active management has never been in worse repute," John Rekenthaler, vice president of research at Morningstar, tells The Wall Street Journal. "This is the darkest of days."
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