The SPIVA reports are great, and I personally think they are meaningful and actionable.
Nevertheless, I think it is frustrating that S&P is sitting on a ton of data and disclosing only one number--win percentage. There are a dozen numbers one would like to see in order to get the full picture. Here are various possibilities that could change the picture.
1) They say nothing about distribution of outcomes. If the 90% that lose, lose by only a tiny amount, but the 10% that win score major jackpots, then it is possible that active funds, taken collectively, could be beating the index.
2) Percentage of wins and losses implies equal weight. But investors don't invest in funds equally. As a plausible idiot once said, "Investors aren't stupid, they know which are the good funds and those are the ones they invest in."
What if the giant-AUM funds do well, but S&P they are including lots of tiny funds that hardly anybody really invests in? Any methodology to account for this would be debatable, but I'd like to see it anyway.
I don't think S&P has the data for this, but one would really like to know, for example, the grand dollar-weighted average returns of 401(k) participants investing in active funds offered by their plan, versus the index funds offered by the plan.
3) They match against the index, but in real life one can't invest in the index, only in index funds which have (very small!) amount of lag due to expense, or fund management issues. It is a pity they don't pick some slightly lower number to represent the actual returns of real index funds, and show us how much that would change the numbers. I suspect the change would be small, but one would like to know.
4) One would sure like to see the actual list of funds they place in each category. Or at least a clear statement of how they determine membership in a category.
Nevertheless, I think it is frustrating that S&P is sitting on a ton of data and disclosing only one number--win percentage. There are a dozen numbers one would like to see in order to get the full picture. Here are various possibilities that could change the picture.
1) They say nothing about distribution of outcomes. If the 90% that lose, lose by only a tiny amount, but the 10% that win score major jackpots, then it is possible that active funds, taken collectively, could be beating the index.
2) Percentage of wins and losses implies equal weight. But investors don't invest in funds equally. As a plausible idiot once said, "Investors aren't stupid, they know which are the good funds and those are the ones they invest in."
What if the giant-AUM funds do well, but S&P they are including lots of tiny funds that hardly anybody really invests in? Any methodology to account for this would be debatable, but I'd like to see it anyway.
I don't think S&P has the data for this, but one would really like to know, for example, the grand dollar-weighted average returns of 401(k) participants investing in active funds offered by their plan, versus the index funds offered by the plan.
3) They match against the index, but in real life one can't invest in the index, only in index funds which have (very small!) amount of lag due to expense, or fund management issues. It is a pity they don't pick some slightly lower number to represent the actual returns of real index funds, and show us how much that would change the numbers. I suspect the change would be small, but one would like to know.
4) One would sure like to see the actual list of funds they place in each category. Or at least a clear statement of how they determine membership in a category.
Statistics: Posted by nisiprius — Sun Jul 07, 2024 10:09 am — Replies 11 — Views 1062