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The authors find that, on average, active equity funds outperform, active fixed income funds underperform, and fees consume much of active management’s value added. Simple fund-selection rules can help identify better active managers.


Studying a comprehensive universe of European-domiciled cross-border UCITS equity and fixed income funds we find that (i) active equity funds on average outperform passive alternatives before fees by about the level of the fees, (ii) active fixed income funds underperform on a net basis, (iii) fees consume a significant part of the value added of active management, (iv) simple fund selection rules help to identify the better active managers. Finally, we develop the concept of minimum required selection skill and find that investors in actively managed funds could meet this hurdle provided fees are limited.

About the Authors

Guido Baltussen

Guido Baltussen is professor of finance at Erasmus School of Economics, Erasmus University, Rotterdam, the Netherlands, and executive director of Quantitative Investments at Robeco Asset Management, Rotterdam, the Netherlands.

Stan Beckers

Stan Beckers is managing director of BlackRock Solutions, EMEA. Previously, he held positions as head of the European Scientific Active Equity team and head of the Alpha Management group at BlackRock. Mr. Beckers has worked at BARRA in roles that included establishing and managing their non-U.S. operations and running their London office, and he served as global head of investments for WestLB Asset Management. He also established and ran the investment office of Kedge Capital. Mr. Beckers has maintained strong links with academia alongside his business career, publishing a number of academic works and holding a position as visiting professor of finance at the University of Leuven.

Jan Jaap Hazenberg

Jan Jaap Hazenberg is head of product strategy at NN Investment Partners and lecturer at the Rotterdam School of Management, Erasmus University, The Netherlands.

Willem Van Der Scheer CFA

Willem Van Der Scheer, CFA, is a senior investment manager at Aegon Bank.