An easy win for rationalists is to avoid actively managed mutual funds. As a NYT article points out:
"High fees, often hidden from view, are still enriching many advisers and financial services companies at the expense of ordinary people who are struggling to salt away savings....even for retirement accounts that are to be covered by the rules, many advisers are not required to act in their clients’ best interests. This means that they are legally entitled to look out for themselves first and recommend investments with higher fees, to the detriment of those who have asked for help....even when fund managers succeed in outperforming their peers in one year, they cannot easily repeat the feat in successive years, as many studies have shown. That’s why low-cost index funds, which merely mirror the performance of the market and don’t try to beat it, make a great deal of sense as a core investment....With fees included, the average actively managed fund in each of 29 asset categories — from those that invest in various sizes and styles of stocks to those that hold fixed-income instruments like government or municipal bonds — underperformed its benchmark over the decade through December. In other words, index funds outperformed the average actively managed fund in every single category....Investors who believe they have found honest and skillful advisers may still want to understand all of this. Not everyone truly has your best interest at heart."
I think this is very likely. When going to label funds, naturally currently existing ones come to mind - but these are the survivors. Failed activists funds don't leave much of a track record.
Why don't we turn the academic literature then. There, failures are just as interesting as successes.
1. Activist hedge funds are high risk high reward. So yes, selected bias would make them seem like outlier successes beyond their competitors. Let me steel man your argument: Ryan and Schneider (2002) predict that larger hedge funds are likely to be more activist, and that looks roughly the case (consider Blackrock which managed just about everything everywhere). That's reverse causality right there.
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However, would that explain all the variance? Possibly. But it's not the only nor most parsimonious explanation.
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Say you picked the highest return indexes - generally emerging country indexes' risky industries. Consider what activists could do to those kinds of firms? Suddenly those indexes's businesses don't look so solid anymore..
But a conclusion in 'Marguerite Schneider and Lori Verstegen Ryan's "A review of hedge funds and their investor activism: do they help or hurt other equity investors?" where these quotes come from, is that hedge funds tend to be even more activist than be explained by that background noise. That suggests there is some sense in activism, at least among institutions (if regular high net worth individuals pooled their funds they might very well fuck up without great proxy advisors)
An easy win for rationalists is to avoid actively managed mutual funds. As a NYT article points out:
"High fees, often hidden from view, are still enriching many advisers and financial services companies at the expense of ordinary people who are struggling to salt away savings....even for retirement accounts that are to be covered by the rules, many advisers are not required to act in their clients’ best interests. This means that they are legally entitled to look out for themselves first and recommend investments with higher fees, to the detriment of those who have asked for help....even when fund managers succeed in outperforming their peers in one year, they cannot easily repeat the feat in successive years, as many studies have shown. That’s why low-cost index funds, which merely mirror the performance of the market and don’t try to beat it, make a great deal of sense as a core investment....With fees included, the average actively managed fund in each of 29 asset categories — from those that invest in various sizes and styles of stocks to those that hold fixed-income instruments like government or municipal bonds — underperformed its benchmark over the decade through December. In other words, index funds outperformed the average actively managed fund in every single category....Investors who believe they have found honest and skillful advisers may still want to understand all of this. Not everyone truly has your best interest at heart."