On Active Mangement, Chasing alpha > Reality of the chances of choosing the correct active manager

[PieterVenter7]

In this section you mention the following

but there is a subset of active fund managers that have been able to show results in the long run. You want to invest your money with these managers

I think the article should be more upfront with the reality is how difficult it is to choose the correct manager and its like picking stocks. Also fund manager change over time so a fund that does well this decade may not do well next decade.

To the statistics The S&P Dow Jones releases the SPIVA Scorecard index every year. Which compares the indexes with performance of Active managers.

So on the full report lets look at the 10 year figures as we are doing long term investment for wealth building
If we look at global diversified index (S&P Global 1200) 96.67% of fund managers under perform the index
And if we looked at the local non capped version (S&P South Africa 50 Index) 95.42% of fund managers under perform the index

With a risk adjusted approach
Global diversified index (S&P Global 1200) 100% of fund managers under perform the index
local non capped version (S&P South Africa 50 Index) 89.31% of fund managers under perform the index

You can also look at the survivorship of funds over a 10 year bases in RSA
South African Equity has a 63.36% of funds surviving 10 years
Global Equity has a 73.33% of funds surviving 10 years

So with this data you have less that 5% chance of picking the correct active fund even if it survives.