Marketbeat notes a research piece from Savita Subramanian of BofA/Merrill (gee, they seem to be coming up a lot lately; I have to stop hanging around with Rosenberg) that mentioned the outperformance by active managers has been getting passed around institutional desks a lot lately.
Three different hedgies sent me this excerpt:
A good quarter for active funds
57% of managers beat the Russell 1000 during the first quarter-which compares very favorably to just one in five outperforming last year. The margin of out-performance came in at almost a percentage point, with the average fund beating the market by 0.7ppt. Having a style bias seemed to pay off as well: both Growth and Value managers had high hit rates for the quarter, with 77% of Growth managers and 72% of Value managers beating their benchmarks. Core managers had the lowest hit rates this quarter, with just 45% outperforming the benchmark.
Why is this 0.7% quarterly out-performance so significant?
Most equity mutual fund managers are charging investors anywhere between 1.5% and a load as high 5.75% (plus internal expense ratios). Hedge funds typically are charging 2 & 20 (2% fee + 20% performance).
So, while stock picking appears to have made its return from the wilderness, basic mathematics remains lost at sea . . .