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Manager selection is key, if possible

S&P's midyear SPIVA scorecard showed how difficult it is for active managers to outperform their benchmarks over the long term and further fuels the active vs. passive debate.

Over the trailing five-year periods ended June 30, 85% of active large core managers failed to outperform the S&P 500 Growth index, while 89% of large value managers failed to add alpha over the index. Large growth managers fared a bit better, with about 76% falling behind the index. The picture was more bleak for small-cap managers, with less than 10% failing to outperform their respective indexes across the three categories.

Results among fixed-income managers were more dispersed. No funds in the long-government bond category were able to outperform their index. Funds in the intermediate investment-grade category, benchmarked to the Barclays Aggregate bond index, did much better, with about 60% outperforming the index. Municipal bond funds also did well against their benchmarks.