Each year, Dimensional analyzes returns from a large sample of US-based mutual funds. Our objective is to document the power of market prices by assessing fund manager performance relative to index benchmarks. This year’s study updates results through 2016. The evidence shows that a majority of fund managers in the sample failed to deliver benchmark-beating returns after costs.
We believe that the results of this research provide a strong case for relying on market prices.
Using a representative sample of US-domiciled mutual fund returns from Morningstar, the report documents the power of market prices by assessing fund returns over multiyear periods. The exhibits include data visualizations of fund survivorship and outperformance, persistence of top-quartile funds, and the impact of high fees and turnover on manager performance.
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SUMMARY
The performance of US mutual funds illustrates the power of market prices. For the periods examined, the research shows that:
- Outperforming funds were in the minority.
- Strong track records failed to persist.
- High costs and excessive turnover may have contributed to underperformance.
Source: Dimensional Fund Advisors LP.
Results shown during periods prior to each Index’s index inception date do not represent actual returns of the respective index. Other periods selected may have different results, including losses. Backtested index performance is hypothetical and is provided for informational purposes only to indicate historical performance had the index been calculated over the relevant time periods. Backtested performance results assume the reinvestment of dividends and capital gains.
Eugene Fama and Ken French are members of the Board of Directors for and provide consulting services to Dimensional Fund Advisors LP.
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All expressions of opinion are subject to change. This article is distributed for informational purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, products, or services.
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About the Author

Dimensional Fund Advisors
Dimensional is a global investment manager dedicated to implementing the great ideas in finance. Founded in 1981, Dimensional Fund Advisors has a long history of applying academic research to practical investing. Headquartered in Austin, Texas, Dimensional Fund Advisors has offices internationally in Canada, Australia, Japan, and Hong Kong.