[Source: Morgan Stanley Investment Strategies, Bloomberg ]

As can be seen, the median fund generally performed no better than the benchmark index. A significant performance drag for active funds are the fees charged, as well as high turnover generating taxable gains.

There is now a rational case for the use of passive index tracking managed funds – that is, ETFs. This case is based on the observation that passively managed index funds can provide investment returns at least the equal of the median actively managed fund. (The corollary is also true – quality active investment management can perform at least as well as ...