Acting Rationally in Efficient Market Hypothesis Active Investors and Transaction Costs

Active Fund Managers

Since so few active managers or funds have added value in a statistically meaningful way, a casual observer may conclude that active managers are unintelligent, greedy, lazy, or incompetent. Occasionally, these criticisms are valid. However, the real issue is that active money managers are competing aggressively over the same sets of information. Therefore, it's extremely difficult for them to gain a consistent competitive edge over their peer group and even more difficult against a passive benchmark (or fund) where costs are lower.