Vanguard recently published a short paper called “Myth: Active Management Performs Better in Certain Market Segments.” Taken literally, that claim is untrue. Over any time period, some categories of active funds fare better than others. Thus, per Morningstar’s most recent Active/Passive Barometer research, three times as many actively run emerging-markets stock funds beat their benchmarks over the trailing 10 years as did active large-blend U.S. stock funds.
The title isn’t fully accurate at the next level of abstraction, either. Not only do some categories of active funds outperform others over a single time period, but extending those studies also uncovers some persistence. Active emerging-markets funds routinely give indexers a stronger fight than do large-blend U.S. stock funds. Small-company stock funds have more relative winners than do blue-chip funds.