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Why active funds underperform even when the manager picks well

The managers running the biggest active funds picked stocks that beat the market in 2025 — and most still lagged their benchmark. A Morningstar do-nothing experiment and a body of academic research explain why active funds underperform even when the picking is good: skilled buying undone by poor selling, the hidden cost of trading, and the incentives that keep managers churning. The UK evidence points the same way.

Robin Powell

Investment consultants showing alternative asset allocation charts to group of pension fund trustees during advisory presentation in boardroom

Optimism as a business model: Why investment consultants can't afford to recommend simplicity

nvestment consultants have systematically raised their return assumptions for alternative assets since 2001 — not because performance improved, but because complexity generates fees. New research from Stanford and Harvard reveals how consultant optimism drives billions in pension allocations, despite mounting evidence that simple, low-cost indexed strategies often outperform alternatives-heavy portfolios. The entire boom may be built on structural conflicts rather than superi

Robin Powell

Oct 28, 202514 min read

Dunster House clock tower at Harvard University. Harvard's $50 billion endowment is among many American charitable institutions that consistently underperform simple, low-cost index fund strategies despite access to sophisticated investment resources.

Poor endowment investment performance costing America's charities billions

Research analysing 374,351 US charities reveals shocking endowment investment performance failures that destroy billions in donor funds. Even sophisticated institutions with professional management consistently underperform simple index portfolios through excessive fees and poor decisions. The study exposes critical lessons for charity trustees worldwide who must maximise every dollar for their missions, and individual investors seeking to avoid the same costly mistakes.

TEBI

Aug 20, 202510 min read