FundQuest study says active investment managers need more rigorous vetting. Investment-platform provider FundQuest is out with a white paper that attempts to determine how much of a fund's return is a function of manager skill and how much of it comes down to category risk.

"Overall, compared to previous studies, there are considerably fewer categories in which active management outperformed the category indexes in this year's study and also more categories in which active management merely equaled their best fit benchmarks," says FundQuest's CIO Tim Clift. "This decline verifies the need for more sophisticated research efforts than ever before to find outperforming managers."

Matter of efficiency

The white paper, Practical Applications of Active and Passive Investment Management: Examining Real Alpha and Exotic Beta, compares the benefits of active and passive portfolio management by looking at the performance of more than 16,000 actively managed mutual funds across 58 categories and representing more than $7 trillion in assets.

Boston-based FundQuest says the study shows that the more efficient investment categories, which were researched more and had more assets allocated to it, often fare better as passive investments. Less efficient categories, on the other hand, benefit active management.

"This research gives us a powerful tool to construct portfolios that combine the cost effectiveness of passively managed funds in many categories with the potential returns of actively managed funds in categories where active management has consistently beaten the indexes," says FundQuest's CEO Jim Fox.

Here's a link to the form you have to complete to get a copy of the white paper.

Beneficial

In other FundQuest news, the mutual-fund and separately managed account provider has added Beneficial Investment Services (BIS) to its list of clients.

"The expansion of our investment offering provides our clients with access to a broad range of products that reaches far beyond our traditional offerings," says BIS' president and CEO Charles Funke. "Having FundQuest as a strategic partner gives us access to a customizable platform that is provided by an industry leader in managed account services."

BIS is a subsidiary of Salt Lake City-based Beneficial Financial Group.

Boston-based FundQuest is a subsidiary of Paris-based BNP Paribas. It has about $36 billion in assets under management and administration. -FWR

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