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Warning: Today's fund winners will be tomorrow's losers

Past performance in fact does seem to provide a good indicator of future results, just not in the way you might think.

Anyone who's ever even contemplated investing has seen the familiar disclaimer warning against picking a manager or strategy simply on track record.

A study from S&P Dow Jones Indices shows just how important heeding that advice is, finding that positive past results come close to assuring negative future results.

Specifically, of the equity mutual funds in the top quartile performance-wise—measured against their benchmark indexes—in March 2013, just 5.28 percent were still there in March 2015. The news was worse for large caps, of which just 3.95 percent managed to stay at the top.

Over three years ended in March 2015, just 16.3 percent of funds in the top half managed to stay there. The trend paints a grim picture:

Track record

Fund type
Pct. In top quartile March 2012
Mar-13
Mar-14
Mar-15
All domestic 30.87 4.69 1 0.28
Large-cap 30.86 3.72 0 0
Mid-cap 28.71 0 0 0
Small-cap 30.41 6.08 1.35 0
Multi-cap 32.43 7.57 2.7 1.08
S&P Dow Jones Indices

The results add fuel to the debate between active and passive investment strategies, a quarrel that has intensified now that the mostly passively managed exchange-traded fund industry has surpassed $2 trillion in assets and has begun to attract more retail investor money.

"We're not saying active management is dead or anything, because results show that 15 (percent) to 20 percent of active managers successfully beat the benchmark," Aye Soe, director of index research and design at S&P Dow Jones Indices, said in a telephone interview. "We want to highlight how hard it is for the average investor to identify the winning manager, or your Warren Buffetts of the world."

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To be sure, S&P Dow Jones has some skin in the game. The group sponsors a family of indexes used as the cornerstone for some of the largest ETFs and the comparatively small number of mutual funds that track indexes.

However, the numbers are what they are.

Of all domestic funds, just 21.13 percent in the top half in 2013 remained there in 2015. Just 16.63 percent of large-cap and 17.37 percent of mid-cap funds could make that claim.

"There's a lot of education that we're putting out there with regard to the merits or benefits of passive investing," Soe said. "We are index providers, so we have a vested interest. However, we let the data speak for itself."

The data also track mobility, and found the best-performing funds were more likely to move to the worst quartiles rather than the reverse effect. Of the 427 fund in the bottom group, just shy of 16 percent moved to the top over a five-year period, while of the same amount in the top group, 21.8 percent slipped into the bottom quartile.

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One trend worth watching is the improved performance of active managers this year. About half are beating their equity benchmarks in 2015, thanks to increased dispersion levels between sector performance and decreasing correlation.

It's also important to note that benchmarks aren't everything when measuring active performance. Managers also are tasked with taming volatility and focus not only on capturing upside in the market but also mitigating the damage during downturns. Stocks have plodded through the year, with the S&P 500 notching a year-do-date gain of just 2.7 percent.

The upshot is that investors need to weigh their moves carefully when simply looking at performance. Outfits like Morningstar and others that rate fund performance use raw returns as only one factor when rating funds, also factoring in fees and expenses, management style, strategy and other metrics

One final note: The tables S&P carried to show performance figures came with a footnote, the contents of which you can guess: "Past performance is no guarantee of future results."