Research produced by Standard & Poor’s highlights the lack of persistency among active mutual funds to maintain outperformance relative to their peers. Using one-year returns ended Sept. 30, 2012, as a base period, top-quartile managers across the five major U.S. equity classes had difficulty maintaining that success in the succeeding years. An average 37% of those managers remained in the top quartile after the next 12-month period and further dwindled each year thereafter. As of Sept. 30, 2016, less than 1% of large-cap managers in the top quartile in 2012 maintained that position, while none of the managers from the other asset classes was ranked.
Expanding the field of view to the top half of managers, there was still a significant drop-off in the subsequent 12-month periods following September 2012, but with more retention than the top quartile. An average 5.4% still ranked in the top half at the end of the observed period; 9.3% of small-cap managers were able to provide returns above the median over the five-year period.
