We recently discussed the Seattle Times reporting on the Seattle City Pension Plan and badly it has performed over the past ten years leaving the pension a billion dollars short of what it need to meet its obligations. We suggested they save a fortune and improve their perfomance potential by using index funds.
It seems that Seattle Times readers had the same suggestion so the Seattle Times reporter shared that suggestion with the plans chief investment officer, Jason Malinowski. He responded by stating that passive investments made up 34% of the SCERS plan, but defended the hiring of active managers “if the particular market segment is believed to be less efficiently priced.” He cited emerging markets as an example of inefficient markets.
So, we decied to see if some of the best active fund managers showed enough skill in picking emerging markets stocks to justify their higher fees, comparing the with a passive portfolio from Dimensional Funds.
Here's the chart of the 15-year average annual figures from Morningstar.