It is kind of an intellectual mystery to me that guys like this don't understand the arithmetic of active investing as William Sharpe explained it to us over 25 years ago. Any pool of active investors will inevitably produce results, before fees, that are the average of the stocks they are investing in. After fees, its a loss.
Per Upton Sinclair, though: "It is difficult to get a man to understand something, when his salary depends upon his not understanding it!"
The key to these claims of "beating" is that the managers are investing in things outside the benchmark average that they are comparing themselves to. In fact, the last issue of Schwab's investor magazine quoted a Schwab panjandrum who said that they try to identify outperformers by finding managers who have "the courage" to buy outside their benchmark category.
The active managers are starting to figure out how to game the system this way, so these arithmetically-impossible claims will only proliferate. Worse, the hucksters will be very effective in confusing the investing public with these outperformance "facts."
