As sponsors and 401(k) participants continue tochannel more assets into passively managed mutual funds, newdata from Fidelity suggests retirement savers would be wise to notthrow the baby out with the bathwater in shunning actively managedU.S. large cap equity funds.

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Some actively managed U.S. equity funds have historicallyoutperformed benchmarks, and delivered greater returnsthan passively managed funds, net of fees,according to a new Fidelity paper, "Some Active Funds Rise Above aTough Year."

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On balance, the average returns for active funds lag indices — afact that perhaps best explains the exodus from activeinvestments to passively managed index funds and ETFs.

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Last year, Morningstar launched its Active/Passive Barometer.Its seminal report found actively managed funds underperformedpassive counterparts across almost all asset classes. Low costactive funds faired better, according to Morningstar, but even theyunderperformed the average passive fund in nine of the 12 assetcategories the firm examined.

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Fidelity’s new research parses the active versus passive debatea bit further.

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By applying two filters — fund cost, and the size ofthe fund family managing an active fund — Fidelity found theaverage U.S. large-cap active fund outperformed benchmarks by 70basis points in 2015, after accounting for fees.

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Between 1992 and 2015, the same subset of active fundsoutperformed the passive competition by 18 basis points annually,as the average passively managed large-cap U.S. equity fundunderperformed benchmarks by 4 basis points annually.

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“Industry-wide averages can be misleading, and may be doinginvestors a disservice by giving them the perception that allactive funds cannot outperform passive funds, which is simply nottrue,” said Timothy Cohen, chief investment officer for FidelityInvestments, in a statement.

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How much of a disservice? Assuming the 18 basis point return offiltered active funds — those with lower fees that come from thelargest fund families — Fidelity says workers could retire with$64,000 more than they would had they invested in passive funds,assuming annual investments of $5,000 over 40 years.

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“Applying certain straightforward and objective filters can be ahelpful starting point for investors seeking to identifyabove-average actively managed equity funds that beat benchmarks,”said Cohen.

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To maintain that objectivity, Fidelity compared active andpassive U.S. large-cap equity funds with expense ratios inthe respective lowest quartile, which was capped at 79basis points for active funds, and 11 basis points for passivefunds, according to funds costs in 2015.

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When filtering for size of fund family, Fidelity focused ontotal assets under management for firms running active and passivefunds.

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In terms of active management, size matters,concludes Fidelity. Larger fund companies “use size to theiradvantage by committing more resources to research and trading, andthe benefits of those resources can be shared across all thecompanies’ active U.S. large-cap funds,” according to languagein Fidelity’s report.

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At the end of 2015, the median amount of funds managed by allU.S. large-cap active managers was about $243 million. Themedian amount managed by the top five fund families by size wasmore than $180 billion.

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The five largest fund families held about 49 percent of allactively managed assets, according to Fidelity.

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“Any average analysis of the entire industry will include a highproportion of active fund families that may lack comparableresources to compete,” the report says.

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In fact, Fidelity says the average low-cost active fund from thelargest five fund families outperformed the industry average ofactive funds 98 percent of the time since 1994, when accounting forthree year average returns.

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A Fidelity representative explained that data on both fees andthe five largest fund families was rebalanced on a monthly basisover the research period — 1992 to 2015 — to account for changes indata.

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At the end of 2015, the five largest active fund families wereFidelity, American Funds, Vanguard, T.Rowe Price, and JPMorgan.

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At the beginning of the research period, the top five fundfamilies were Fidelity, American Funds, Vanguard, Invesco, andAmerican Century.

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Nick Thornton

Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.