During the bull market of the 1990s it seemed any fool could make money. There were, as ever, ups and downs, but the stock market moved in one general direction, which was upwards.
That made life tough for fund managers, who had the job of picking which stocks would outperform. The majority of them failed.
The market was running on momentum and, as such, it was difficult for fund managers to outperform stock-market trackers, not least because they charged two, even three, times the annual management fees levied by the cheapest tracker funds, plus exit and entry charges.
What about now, though?
Today's markets appear tailor made for the stock-picker, because there isn't really any direction to them at all. They bounce up and down, largely to the tune of whatever economic news there is.
This point has been underlined by the difficulties faced by Man Group. I've covered the hedge fund manager's problems here before, a big part of which is the AHL fund. AHL uses an clever computer programme to winnow out trends in financial markets and latch on to them. Life gets difficult when trends are very hard to spot.
But clever human stock-pickers, able to single out companies which will succeed during these difficult times, surely ought to do well. Shouldn't they?
I asked Thompson Reuters to look at the performance of funds in the UK All Companies Sector for the past year, the past three years and the past 10 years.
Over the past year a typical FTSE 100 tracker produced a total return of 0.38 per cent, assuming all dividends were reinvested. Some 65 funds beat that. Well done them, then. Unfortunately 135 failed.
Using the more broadly based FTSE All Share index makes things a little easier. It produced a negative return. So investors in a tracker fund following that index would have lost 0.31 per cent. Another 19 funds underperformed the FTSE 100 but beat the All Share. So 84 are in credit on that front compared with 116 laggards.
That isn't good. With a market that is flat on the year, you might expect a bit better from the stockpickers. Over three years a different picture emerges. Many would argue this is a better time horizon because any fund can have a down year. Over this period 145 funds beat the FTSE 100 tracker, which returned a handsome 52.85 per cent. There were only 52 losers (there were three fewer funds). That is pretty impressive. It seems over the longer timespan at least some stock-pickers were earning their money.
When it comes to the broader All Share tracker, however, it returned 56.9 per cent. Only 98 funds managed to beat that. Some 99 failed.
So some 47 funds beat the FTSE 100 but failed to beat the All Share. Which shows you that through they beat the blue-chip index, they didn't do so by very much.
What about over 10 years?
The number of funds operating over this period is, unsurprisingly, rather lower. The results made interesting reading. The FTSE 100 actually returned an impressive 56.9 per cent (but it has to be remembered that 2002 was, again, a down year), over the decade to 31 January 2012. Some 82 funds beat the index, out of 120 in total. The All Share, however, returned 65.55 per cent. Just 64 funds were ahead of it compared with 56 behind. With 18 funds beating the FTSE 100 index but not the All Share, it again shows that they didn't beat it by much. It is also worth noting that over such a long time, the really bad funds tend to get shut down.
I should point out here that UK All Companies covers a huge array of funds and they use different indices to benchmark their performance. But even taking this into account, nearly half the funds I looked at with Thomson Reuters' help failed to beat trackers over 10 years. And that's before you get to the problem of working out how to pick the good ones. Advice on that doesn't come cheap.
At the Independent we could be considered to be skilled amateurs. Because we spend our lives covering business, we should be able to distinguish the silk purses from the sows' ears. Would that it were so easy, but for the past two years our 10 to follow has at least beaten the FTSE 100. And the paper only costs a quid, not 1 per cent or 1.5 per cent of your total investment each year.
Admittedly a professional fund manager doesn't just pick 10 stocks at the beginning of the year and keep them for 12 months. Our 10 is a bit of fun (although we take the challenge seriously).
Fund managers can move in and out of stocks when they want, picking the right moment. The figures suggest too many of them aren't that good at it.
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