Can active management beat the market? Plan sponsors think so

Core Insights - A significant majority of workplace plan sponsors, 80%, believe that active management can consistently outperform the market, while 86% agree that actively managed target date funds can mitigate volatility for participants [1][5] - Despite the optimism from plan sponsors, advisors express skepticism regarding the long-term effectiveness of active management, citing that it rarely delivers sustainable outperformance [3][4] Group 1: Active Management Perception - BlackRock's research indicates that active management is perceived as a valuable approach for uncovering value, managing risk, and adapting to market changes, although these benefits are not consistently realized for retirement investors [2][4] - A survey of 1,300 plan participants revealed that 80% are interested in using actively managed funds for their retirement savings, indicating a strong demand for such products despite the skepticism from advisors [5] Group 2: Performance Data - In 2024, 65% of actively managed large-cap U.S. equity funds underperformed the S&P 500, and this figure increases to 84% over a 10-year period, highlighting the challenges of achieving consistent outperformance in public markets [4] - The SPIVA U.S. Scorecard shows that after fees, at least 80% of equity funds and over half of fixed-income funds lagged their benchmarks over the 10-year period ending December 31, 2024 [5] Group 3: Cost Considerations - Advisors emphasize that investors often lack a clear understanding of active products, which typically come with higher costs that can erode long-term returns [6] - The irony noted by advisors is that in attempting to protect participants from market volatility, plan sponsors may inadvertently implement strategies that result in lower retirement savings [6]