How would you like to get paid to underperform? You don't have to be some professional athlete, or even some overpaid CEO of a major corporation.
You just need to be a mutual fund manager in 2010.
What do I mean?
My friend and co-host David Faber sent me an excellent article from Fortune that cited a research note from Bank of America Merrill Lynch.
The study showed that just 20 percent of large-cap fund managers outperformed the Russell 1000 last year, the worst showing on record.
I've often contended that the asset management business was filled with so-called "closet indexers," money managers who claimed to add value but in truth simply bought the biggest stocks in an index in hopes of not lagging the market. They don't beat the market, but they are still happy to collect your fees.
This underperformance has many investors rightly frustrated and seeking the relative safety of ETFs, but as the Journal reported on Wednesday, fees for that business continue to erode.
Add these facts together and one thing is clear: the mutual fund gravy train is over.
So what's next?
Well, hopefully, after ten years of throwing good money after bad, retail investors will tire of the losses and pull their assets from underperforming funds.
Shockingly, they've haven't yet done so, despite a lost decade for stocks. I suspect this is either do to laziness, or even worse, stupidity.
But either way, what I so know for sure is that if this trend continues, the industry will either continue to contract, or a lost but vital art will come back in vogue: stock picking.
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Gary Kaminsky does not hold any equity positions.
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