Thumbs Down: Active Funds Lag

Physician's Money Digest, March15 2005, Volume 12, Issue 5

About 75% of actively managedmutual funds trail their relevantindexes over a 10-year period, accordingto a new study from FulcrumFinancial. The worst performers arevalue funds, a category in which 81%of the funds underperformed, while73% of blend funds lag their indexes.The study identifies three majorreasons for the lower-than-market-indexperformance. The first is administrativeexpenses in the form ofmanagement fees, sales loads, andredemption fees, which lower yields.Other elements that hurt the performanceof actively managed fundsare high stock turnover and the needto hold large amounts of cash tocover redemptions.