Despite factors that might otherwise suggest a good year for stock pickers, the early returns are not encouraging.
Through the first two months of 2016, just 28 percent of large-cap mutual fund managers are beating their benchmarks, according to a Goldman Sachs analysis. Worse yet, only 1 percent are showing a profit in what has been a tough year for the market.
With volatility and a breakdown in correlation expected, many on Wall Street anticipated this would be a good year for active management. However, 2016 is looking a lot like 2015, when only about 27 percent of active managers outperformed.
"Despite the greater alpha return opportunities that come with higher dispersion, the market environment has been challenging for investors," Goldman strategist David Kostin wrote in a report.
"Dispersion" is the investing term for performance difference between sectors. Low dispersion rates make it difficult to find mispricing opportunities and favor passive management, or investing in funds that track various market indexes. In 2016, the worst-performing sector has been financials, with an 11.4 percent decline, while the best of the 10 S&P 500 broad groupings has been telecom, with a gain just shy of 3 percent as of Monday trading.