Passively managed funds beat their actively managed peers by a wide margin, a new study shows. The trend filters across all fund categories, and the comparison would be even starker had the data included managed funds that have since been merged into better-performing funds.
The study, conducted by a division of Fulcrum Financial Inquiry called Fulcrum Financial, looked at 10 years of mutual fund data and found that the funds benchmark indices perform markedly better than actively managed funds by about 3-1.
Fulcrum also said it plans to address the problem of poor mutual fund results and rising fund costs by introducing a new 401(k) solution. "Rather than using mutual funds, Fulcrum offers exchange-traded funds that can be combined to accomplish any prudent investment approach," the firm said in a release.
"The news is full of government investigations and complaints about mutual funds, conflicts of interest and excessive fees," said one of Fulcrums founders, David Nolte. "We searched far and wide for a 401(k) service provider that was independent of typical Wall Street conflicts of interest, did not charge high fees and could offer superior investment performance. We didnt find any, so we developed our own."
The company said the new low-cost 401(k) would have fees that were readily disclosed and easy to understand. With no ties to Wall Street, the company declared that it would be completely independent.
"The result is a combination of advanced technology, Internet convenience, and low-cost ETFs that is smarter, better, and cheaper than other offerings," Nolte said.