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Although I don't have the necessary data to prove or disprove it, the whole subject of assessing active manager's returns against their benchmarks makes me wonder about the quality of the data and the process. We know there are thousands of active managers, but how many of them are legitimate players? When every little bank (and big bank) or wealth manager creates a “me too” fund that goes into the data pool, we should be asking: is this a legitimate attempt to provide alpha? Or is it just a way to capture fees when the intention of the manager is merely to make sure not to do so badly versus the market that their investors, many of whom may be captive, bail out? Perhaps a better way to assess active managers is to first remove those firms with no clear incentive to provide alpha, those who can afford to limp along with so-so returns because fund management is not their bread and butter. Those who can afford to put out a fund that fails, that they then scrap and reinvent and don’t fear to suffer any reputational damage? Perhaps it can also make sense to examine the real goals of the managers to remove those who are only attempting the mildest outperformance over their benchmarks. Just a thought.

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