Active V. Passive
I received the following this morning in DFA's monthly blast email:

Passive wins again. Standard and Poor’s recently published its SPIVA results. The conclusion? Surprise, surprise…active managers underperformed indexes on average in a wide variety of asset classes*.

S&P Asset Class	% of Active Funds Beat By the Index (5 yrs ended 6/30/06)
Large Cap	67%
Mid Cap	84%
Small Cap	79%
Global	65%
International	80%
International Small	78%
Emerging Markets	88%

* Source: Standard and Poor’s

One often hears the claim from so-called “core-satellite” investors that indexing only works in the efficient liquid areas of the market, like US large caps. They espouse that insightful managers can add value in less efficient areas of the market like small caps, international, and emerging markets. The data is simply another example that such positions stand on shaky ground.

Pretty interesting, especially in the non-large cap asset classes. I always viewed emerging markets, international and small cap as a place where active management could add some value.