Manager selection is key, if possible

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.