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Dog Ate the Alpha, Other Excuses for Why Your Fund Stinks

Wall Street strategists have crunched a lot of numbers recently in an effort to answer a simple question: why did active fund managers do such a lousy job picking stocks this year?

Depending on how you tally returns, it looks like three quarters or more of active funds are trailing their benchmark indexes this year. Bank of America Corp. strategist Savita Subramanian last week put the number of outperforming funds at only 18 percent, the lowest “hit rate” in 10 years. Meanwhile Vanguard Group Inc., whose motto could be “if you can’t beat benchmarks, join ’em,” is attracting record new investments into strategies that track indexes passively at a much lower cost than active funds.