While it's true that most active funds don't beat market indexes over long stretches (after accounting for fees), a new Morningstar analysis finds some that have.
Morningstar senior editor Karen Wallace went looking for actively run funds that have beaten the S&P 500 index over the trailing 15-year period from January 2002 through December 2016. To find it, she ran a screen in Morningstar Direct to find all funds in the U.S. large-value, large-blend and large-growth categories, and then ranked them by highest 15-year annualized return (excluding any funds that their manager research analysts do not cover as well as those earning a Morningstar Analyst Rating of Neutral).
Here are the 10 she highlighted:
AMG Yacktman (YACKX)
Fidelity Contrafund (FCNTX)
Vanguard Primecap (VPMCX)
Amana Income (AMANX)
Parnassus Core Equity (PRBLX)
FMI Large Cap (FMIHX)
Mairs & Power Growth (MPGFX)
Diamond Hill Large Cap (DHLAX)
Dodge & Cox Stock (DODGX)
American Century Equity Income (TWEIX)
The article cautions that inclusion on this list doesn’t constitute a prediction that these funds will continue to outperform the S&P 500 index. While expense is a factor in the evaluation of these funds, it wasn’t included in the screening criteria. However, Wallace says that of the 15-year outperformers, 50% had fees that fell into the lowest quartile of all large-cap U.S. funds, and the other 50% were in the second quartile.
Finally, she explains that the article shouldn’t be interpreted as a recommendation of active funds over index funds generally, and that most active funds do, in fact, trail their benchmarks over long stretches after accounting for fees. That said, “the odds of success for active funds are much improved when their cost hurdles are reasonable,” Wallace notes.
