This isn't surprising, but it's important (emphasis added in bold):
Between 2004 and 2008, the S&P 500 stock index outperformed 71.09% of actively managed large-cap funds, according to the year-end 2008 report from the New York-based research firm.
In addition, the S&P MidCap 400 Index outperformed 75.9% of mid-cap funds and the S&P SmallCap 600 Index outperformed 85.5% of small-cap funds.
"The belief that bear markets strongly favor active management is a myth," Srikant Dash, global head of research and design at Standard & Poor's, said in a statement. "The bear market of 2000 to 2002 showed similar outcomes."
Similar results were also reported for international-equity and fixed-income funds.
Among international-equity funds, the indexes outperformed a majority of actively managed non-U.S. equity funds.
For fixed income, the relative shortfall from the five-year benchmark ranged between 2% and 3% a year for municipal bond funds and 1% to 5% a year for investment grade bond funds, Standard & Poor's reported.
As we've written over and over, some active funds do outperform the averages in given periods. (By definition!) The trick is to hire those funds before they win...and fire 'em before they lose. After all, hiring them after they've gone winning streaks raises the near-inevitable problem of mean reversion. And hiring them after they've gone on losing streaks isn't especially smart either, because the data show that under-performance is substantially more persistent than out-performance.
So what's the intelligent investor left to do? Favor passive over active vehicles, and ensure that any active vehicles are different enough from their passive counterparts to have a real shot at delivering positive alpha.
Sue Asci, "S&P passive funds trumped active over past five years," Investment News, April 20, 200