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> Instead, it's that on balance, by far most managers don't beat the S&P 500 on an after-fee basis.

Interestingly, most managers actually do match the S&P500, but before fees. I don't have a link handy, but there have been some academic papers on their performance.

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The average active manager who mostly uses stocks in the S&P 500 matches the S&P 500, before fees, almost by definition. Given that the vast majority of passive investment is approximately tracking the S&P 500, active managers -- the complement of the passive set -- must also have the same average. The only way active managers could average something substantially different is if passive investments underperformed or overperformed, neither of which are the case.

Most funds end up so large that they can’t help but to be basically the s&p 500, just with slightly different weightings.

To majorly out perform or underperform you have to be drastically different.

> most managers actually do match the S&P500, but before fees.

so what exactly are you paying them their fees for then?

Either way, for an active manager to be worth their fees, they _have_ to beat the index by more than their fees plus a bit more to make up for the risk that they don't. Otherwise, you'd be better off in a passive fund.

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