I recently came across an article on Substack. I think it raises some important points, backed by data that’s hard to ignore:
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.