Empirical evidence suggests that active managers:

Question

BlackTom AI · Accepted Answer

The question asks about what empirical evidence suggests regarding active managers' performance. 
Option A: 'Always produce superior returns relative to passive managers' This is not supported by evidence; while some managers may beat benchmarks in certain periods, the word 'always' is too strong and contradicts the general finding that persistent outperformance is not reliably achieved after costs.
Option B: 'Always produce inferior returns relative to passive managers' This is also too absolute. The literature shows no guarantee of always underperforming; occasional outperformance occurs, but not consistently across managers or time.
Option C: 'Find it difficult to consistently generate excess returns on a net of fees basis' This aligns with the well-known conclusion from empirical studies (e.g., after accounting for fees and expenses, many active managers fail to deliver persistent alpha). The emphasis on consistency and net of fees captures the core finding that persistently beating the market is challenging once costs are included.
Option D: 'Perform better in the short term' Short-term outperformance can occur, but empirical evidence generally focuses on the difficulty of sustaining excess returns over longer horizons rather than a blanket claim of short-term superiority.
Option E: 'Perform better in the United States compared to their performance in Australia' Cross-country performance differences exist, but a blanket statement that active managers perform better in the U.S. than in Australia is not a central empirical takeaway and oversimplifies cross-market results.
In sum, the most accurate reflection of empirical evidence is that active managers struggle to consistently generate excess returns net of fees, making option C the correct interpretation among the choices.

Empirical evidence suggests that active managers:

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