Improving the Odds in Active Management
American Funds' new study makes the case for seeking funds with low fees and high manager ownership.
Finding Better Large-Company Stock Funds
Last year, historically quiet American Funds stepped into the active-passive fray with a report entitled The Active Advantage. The contents did not match the wrapper. The study convincingly showed that the firm's own stock funds had excelled, decade after decade. However, there was no apparent advantage to investing in other companies' actively managed funds.
American Funds has returned with a sturdier effort. Released last week, the company's follow-up (blandly titled Expect More From the Core) delivers what the first paper did not--a case for selecting an active stock-fund manager over an index fund. At which point your suspicions are probably aroused. Rest assured, while American Funds most certainly is interested in spreading the gospel of active management, I am not. If the numbers work, they work. If they don't, they don't.