TY - JOUR T1 - Are Actively Managed Mutual Funds Per Se Imprudent Choices for 401(k) Plans? JF - The Journal of Retirement SP - 58 LP - 77 DO - 10.3905/jor.2019.1.054 VL - 7 IS - 1 AU - Atanu Saha AU - Heather Roberts Y1 - 2019/07/31 UR - https://pm-research.com/content/7/1/58.abstract N2 - Many corporations and financial institutions have recently faced lawsuits in which plaintiffs have alleged harm to 401(k) plan participants by the inclusion of high-fee actively managed mutual funds in plan offerings, instead of low-cost index funds. The goal of our study is to compare the performance of actively managed and passive index funds. Using a large dataset of more than 11,000 mutual funds, we find that, on average, actively managed funds do have higher fees than their index fund counterparts. However, a portfolio of active funds chosen based on certain key characteristics, such as low expense ratio, low turnover, high Sharpe ratio etc., have better net-of-fees returns than passive index funds in the categories of US equity, international equity, fixed income, and mixed assets. The findings in our study imply that inclusion of a higher-fee active fund in a 401(k) plan does not necessarily imply an inferior or imprudent choice.TOPICS: Retirement, mutual fund performance, performance measurement ER -