Therefore, as outlined in Covestor's investment philosophy, emerging managers with smaller asset bases are potentially better-positioned to provide outperformance. In fact, closet index funds with holdings very similar to the benchmark tend to underperform, mostly due to higher costs, according to academic research. Also, managers who take a more active approach tend to have a better chance of beating the index on a risk-adjusted basis.

Charts: All Star Charts

Photo credit: trackrecord

DISCLAIMER: All opinions included in this material are as of October 17, 2013 and are subject to change. Investment involves risk. Investors cannot invest directly in an index. Indexes have no fees. Past performance is no guarantee of future results.

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