Vanguard examines whether active management is becoming more successful, arguing that shifting market conditions may be improving the odds for active managers after a long period of underperformance. The paper highlights that dispersion and volatility have increased, creating a more favorable backdrop for differentiated stock selection.
Keys to improving the odds of active management success
Vanguard
Research
20 Pages
Key Takeaways
Rising Active Success Rates: Active manager outperformance rose to ~49% in recent periods, up from ~38% in the prior decade.
Dispersion Creates Opportunity: Cross sectional return dispersion increased by over 20%, improving the opportunity set for stock pickers.
Costs Still Matter Most: Funds in the lowest cost quartile outperformed higher cost peers by ~1–2% annually, reinforcing fee sensitivity.
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