Decades of research across the US and Europe find that:
- Most active funds underperform their benchmark index .
- Outperformance/Alpha generation , when available , is usually due to exposure to factor strategies .
- Fundamental based factor strategies include quality and value.
- Price based strategies include momentum and low volatility .
- Alpha generation is mainly due to inclusion of factor strategy and not fund manager skill.
- Winners are never permanent : Today’s top funds are never at the top forever .