SUMMARY

Do investment results come from skill or luck? Genuine skill is likely to persist, while luck is random and fleeting. Thus, one measure of active management skill is the consistency of a fund’s performance relative to its peers.

The Persistence Scorecard attempts to distinguish luck from skill by measuring the consistency of active managers’ success. This report shows that, regardless of asset class or style focus, active management outperformance is typically short-lived, with few fund managers consistently outperforming their cohorts.

For example, of the domestic equity funds that finished in the top half in terms of cumulative returns for the period from June 2010 to June 2015, 38.6% replicated that accomplishment during the period from June 2015 to June 2020. In fact, it was more likely for a top-half fund to close its doors or change its style (41.5% combined) than repeat its performance in the top half (see Report 6).