"It's never easy to outperform, but in markets that are less efficient with less-perfect information, people perceive it to be easier," said Tim Cohen, a chief investment officer with Fidelity Investments, one of the biggest active asset managers in the country. "Where there's a wider dispersion of returns and less correlation between them, there's more opportunity to beat the benchmark."
It seems to hold true for markets such as small-cap stocks and international equities. The average active fund manager in those asset classes beat his or her benchmark by 86 basis points in the case of large-cap international equities, and 111 basis points in the U.S. small-cap sector, from Jan. 1, 1992, to Dec. 31, 2014, according to data from research firm Morningstar.
The CNBC editorial team presents our inaugural list of the Top 50 Money Management Firms.
In more efficient markets such as U.S. large-cap stocks, however, about 1 in 5 active managers beat their benchmark indexes, and money continues to shift to passively managed funds. It's in the less liquid, less well-understood markets that having a professional manage the portfolio may be a better strategy for investors.
That is, at least, the argument for using more expensive active management of investments. The high-yield bond market, for example, would seem to be a sector where picking securities would be at a premium and where active managers have more room to beat the market. With the energy and mining and material sectors accounting for more than 25 percent of total issuance in the market, the index has been hammered by the collapse of oil and other industrial commodity prices.