The S&P Persistence Scorecard, released twice per year, tracks the consistency of top performing mutual funds over yearly consecutive periods and measures performance persistence (ie, repeat outperformance).

The results are not encouraging for investors who think it's possible to pick investment managers who can consistently outperform the market:

Very few funds have managed to consistently repeat top-half or top-quartile performance.  Over the five years ending September 2010, only 4.10% of large-cap funds, 3.80% of mid-cap funds, and 4.60% of small-cap funds maintained a top-half ranking over five consecutive 12-month periods.  Expectations of a random outcome would suggest a rate of 6.25%.

Looking at longer-term performance, 14.20% of large-cap funds with a top-quartile ranking over five years ending September 2005, maintained a top-quartile ranking over the next five years.  Only 8.50% of mid-cap funds and 27.30% of small-cap funds maintained a top-quartile performance over the same period.  Expectations of a random outcome would suggest a repeat rate of 25.00%.

No wonder active investment management (ie, "beating the market") is called a loser's game.

"The man who thinks he knows something does not yet know as he ought to know."
-- 1 Corinthians 8:2