At the end of 2013, 96 million individual U.S. investors held money in mutual funds, most of it in actively managed funds. For investors, an important question is whether active mutual fund managers have the skills to beat their benchmarks. The answer is crucial to steering asset allocation decisions.
Some managers, according to assistant professor of finance Hitesh Doshi, do outperform their benchmarks. He has proposed a statistical measure to identify these active mutual funds. Funds that score high on his measure beat their benchmarks significantly even after adjusting fees.
Doshi’s research, “Managerial Activeness and Mutual Fund Performance,” was published in The Review of Asset Pricing Studies.
By Julie Bonnin