Whether or not active managers add value after fees, over the full economic cycle, has been a widely contested topic in investment circles for many decades. However, as we illustrate in the report below, the fact is that active management works in Australia. The average active manager surveyed outperformed the S&P/ASX 300 Index; more impressively, even the 75th percentile manager surveyed outperformed, before fees. The fact that active management is rewarded in Australia can perhaps be explained by inexperienced domestic and offshore players who have different investment objectives and different benchmarks. Intuitively, most offshore managers would be measured relative to a MSCI Index, not the S&P/ASX 300 Index, and we suspect that having different objectives and benchmarks alters the zero sum argument. In this report, we examine this in more detail and identify the qualities we look for in listed companies to generate consistent outperformance. (VIEW LINK)
As you note, the MorningStar Institutional Survey excludes active performance fees, which may well eat up most of that marginal out performance by the 'average' manager. The survey also does not appear to allow for survivorship bias - i.e. under performing managers exiting before the 10-year period ends. The result seems great but defies most other financial research evidence, including S&P's SPIVA survey.