John At The Center

Thus, even before costs, the overall portfolio of mutual funds shows no evidence that active managers can enhance returns. After costs, fund investors in aggregate simply lose the fees and expenses imposed on them.

Adding insult to injury, the aggregate mutual fund portfolio looks a lot like the cap-weighted stock market portfolio. When we use the three-factor model to explain the monthly percent returns of the aggregate fund portfolio for 1984-2006, we get,

via Luck versus Skill in Mutual Fund Performance – Fama/French Forum.