Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.

This article originally appeared on ETF.COM here.

As the director of research for Buckingham Strategic Wealth and The BAM Alliance, I am often asked to comment on articles or papers that make a case for active management being the winning strategy. Recently, I was asked to comment on a February 2018 article from Advisory Research titled “Emerging Markets: Active vs Passive.” At the end of 2017, the firm managed more than $7 billion in assets.

Not surprisingly, given the article’s position, Advisory Research presents evidence from an eVestment database of more than 300 institutional actively managed emerging market (EM) funds that shows a majority of active managers outperformed their EM benchmarks, and did so by a wide margin (on average 1.57%). The article thus concluded active management is the winning strategy in EM.

Before you jump to that same conclusion, let’s examine some other evidence. I’ll begin with a look at the latest S&P Dow Jones Indices SPIVA scorecard, from year-end 2017.

SPIVA verdict

SPIVA data shows that, for the last 5-, 10- and 15-year periods, 78%, 85% and 95%, respectively, of actively managed, publicly available EM mutual funds underperformed their benchmarks. That’s a stark contrast to the figures presented by Advisory Research.