Mark 2016 as the latest Year of the Stock Picker that wasn't.
Active funds stumbled through another brutal year, with barely 1 in 3 large-cap managers able to beat the S&P 500, according to figures released Wednesday by S&P Dow Jones Indices. The news got worse farther down the scale, with 89.4 percent of mid-cap managers falling short and 85.5 percent of small-cap managers missing.
Things didn't get better over longer time frames either, with most managers falling short over 1-, 3-, 5-, 10- and 15-year spans.
The numbers come amid a pitched market debate over the benefits of active against passive management, and seemingly annual predictions that stock-picking finally will prevail.
Active managers oversee funds for which they move in and out of individual stocks, utilizing a variety of strategies, while passive funds track indexes and don't employ professional managers. Active funds generally carry much higher fees.
Investors have been shoveling money into passive strategies. Exchange-traded funds, most of which track indexes, saw record inflows of cash during the first quarter on both the stock and bond side. In 2016, passive funds attracted a net $508.4 billion while active suffered $340.1 billion in outflows, according to Morningstar.
"Its been a dismal backdrop in a dismal environment for active. The numbers prove that," said Nick Colas, chief market strategist at Convergex. "Does that mean that environment will last forever? Markets always go in cycles."
Colas believes a decline in correlations, or the tendency of stocks to move in unison that has been pronounced during the current bull market, will benefit active managers looking to capitalize on pricing discrepancies.