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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
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Terry Smith, Neil Woodford and the test Smith set for himself
In January 2020, Terry Smith told his investors why Neil Woodford had failed: the star manager changed his game. Five years on, Smith's own Fundsmith letter records the highest turnover in the fund's history and a new taste for momentum — and the way he explains it matches a pattern behavioural researchers have measured in fund managers' own words.
Robin Powell
Jul 158 min read
Fundsmith's underperformance, at 21 times the cost
Terry Smith built Fundsmith on a simple discipline: buy good companies and do nothing. Now, five years into trailing the market, he is turning over half his portfolio and paying more attention to momentum. The strategy that made his name is changing. The fee that came with it is not.
Robin Powell
Jul 93 min read
The star manager myth: how a phantom stock-picker beat the market
The star manager myth, exposed: a portfolio with no manager beat the NASDAQ by nearly double. The trick that explains real star managers too.
Robin Powell
May 28 min read
Fund fees and performance: the link is getting stronger
New Morningstar research reveals the link between fund fees and performance has strengthened dramatically. A decade ago, some expensive funds generated enough alpha to partially justify their costs. Today, fees explain almost everything. The skill component has essentially vanished.
Robin Powell
Jan 229 min read
Active management still dominates — and the data proves it
Active fund managers keep warning about passive investing's dangerous rise. But new research covering $784 billion in institutional assets reveals active management still dominates — capturing 97% of all fees paid.
Robin Powell
Jan 216 min read
Is Terry Smith right to blame index funds for his struggles?
Terry Smith blames index funds for Fundsmith's five-year slump — but international market data, factor analysis, and 2024's high-dispersion conditions tell a different story. Here's what the evidence actually shows.
Robin Powell
Jan 156 min read
The Terry Smith timing trap: why most investors lost money
Terry Smith's Fundsmith beat the market for a decade, then trailed four straight years. £3.31bn fled in 2024. Most investors lost money vs a tracker. Why? Timing. They bought high after stellar returns, sold low during underperformance. Jack Bogle's iron law: money arrives after gains, leaves during losses. Even star managers can't beat that.
Robin Powell
Nov 3, 20256 min read
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