The standard deviation, or dispersion, of manager alpha ticked up recently after years of slow declines. The measure looks at three-year alpha - a manager's outperformance relative to its benchmark - and how active equity managers differentiated themselves from their peers. In the years prior to 2005, dispersion was high, indicating that manager selection was more critical to outperformance. Dispersion declined over the following decade and similar outperformance could be attained through a larger set of managers.
Small-cap managers have broken out in recent years as better overall market performance has given them room to run. Large-cap growth managers have struggled lately, while large-cap value managers have performed better as a group, but with a greater gap between the top and bottom performers.