PS. Furthermore, an accurate comparison is not beating the index, it's beating it enough to cover the salary/compensation of the fund manager + some (with less risk! Risk = cost!)
If you truly can consistently beat the market, you are already making a killing with your _own_ money.
If you want to use _my_ money to place your bets (presumably b/c you want to leverage your market beating ability), I want a guarantee (because I'm more than happy to take the return of the index).
Unfortunately no one will agree to this as long as everyone else is willing to invest _and_ shoulder the risk
If you can't beat the market with your own money, you shouldn't be trying to do it with someone else's.
If you can beat the market with your own money, why are you so worried about the downside? There should be little risk for someone who claims to be able to beat the market.
If they say that's too much risk, they likely don't think they can consistently beat the market.
Where I disagree with you is that fund managers regularly take risk. They never take risk themselves, rather they supply all of the risk to their clients.
On the flip side-- a passive fund manager would take 100% downside risk of the fund failing to properly track the index, and only in return for a modest fee. Stated differently-- passive funds can and do consistently track the market.
Plus, they are being compensated. I'm offering 90% of the returns above the index :-)
Active funds ask investors to accept 100% of the downside and get taxed on the upside. Actually it’s worse: they’re taxed on both the up and down sides.
If this is a terrible deal for fund managers then virtually by definition actively-managed funds are a terrible deal for investors.
Of course, if you offered your bet to all comers and gave significant publicity, unknown "funds managers" would be happy to take you up, though they might well default if they lost.