What's the Chance of That Happening?

Abstract

This article revisits the debate on the relative benefits of passive and active management processes, focusing more specifically on the U.S. large capitalization stock equity market, represented by the S&P 500 index. It starts by exploring the pre-tax investment returns that an active money manager would have to produce to equal, after-taxes, the S&P 500 index. It then compares those returns to a universe of active money managers to determine how high the manager would have placed in his peer group. The results indicate that only a very small percentage of active money managers would have produced pre-tax investment returns sufficient to outperform, after-taxes, the S&P 500 index.