Hurdle Rate For Active Management

This paper examines how good active managers and hedge funds need to be to outperform passive index funds on an after-tax basis using over 40 years of data. The authors note that while many studies look at the impact of fees on active manager performance they are not aware of any studies that incorporate the impact of taxes over long periods of time. This approach looks at the challenge of earning inflation-adjusted, after-tax returns, and develops a framework investors can use to apply across their entire portfolio.