I recently came across an article on Substack. I think it raises some important points, backed by data that’s hard to ignore:
Even the Most Sophisticated Investors Aren’t Likely to Outperform
Despite their size, resources, and access to elite managers, even the most sophisticated institutional investors—pension plans, endowments, and consultants—struggle to outperform the market over 10-year periods. A recent article by veteran researcher and author Larry Swedroe explains why.
- Institutional investors—despite their size, resources, and access to elite managers—still overwhelmingly underperform the market over 10-year periods. 81% of institutional equity funds and 95% of SMAs/Wrap accounts failed to beat their benchmarks.
- Hiring “star” managers doesn’t help. Studies show that institutional investors often hire managers after strong performance, only to see returns drop to average—or worse—after hiring.
- Even pension plans and endowments, with professional consultants and rigorous due diligence, consistently underperform. One study found that only 1 out of 46 public pension plans generated statistically significant outperformance over a decade.
- The odds of beating the market over 10 years? Just 2%. That’s why Swedroe calls active investing a “loser’s game”—not because it’s impossible to win, but because the odds are so poor that it’s imprudent to try.
- The smarter strategy? Avoid the game altogether. Low-cost, tax-efficient structured funds (such as Dimensional) offer a more reliable path to achieving your goals—with less risk and more peace of mind.
If you’re confident that the so-called “experts” and “elite” money managers increase returns in the public markets, I encourage you to explore the complete article HERE with an open mind.
