I have written a number of blog posts that highlight the debate of actively managed mutual funds versus index funds. Morningstar has another take on this underperformance of active managers.
Morningstar's study concludes that actively managed funds fall behind their indexes not only on a return basis, but also on a risk-adjusted performance basis. So, according to Morningstar's findings, not only are investors getting short-changed on the return of their actively managed fund, they are subjected to more volatility.
Keep in mind, every study has its shortfall. Active fund managers will surely say that the study is unfair. They might say that they shouldn't be compared to a certain index. In some instances, the fund managers will have a strong case. In others, they will simply be on the defensive.
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