The title is a bit deceptive) but the answer to the question raised by the title is that mutual fund investors expected their active managers to protect then from 2008 type markets but in fact index funds continued to outperform though with a smaller margin. Then the risk adverse tried investing in the funds that did well in 2008 (Hussman funds anyone ) Finally after the whipsaw they worked out that on average index funds were a better bet. I don't doubt that several American funds (referenced in the article outperformed but am pretty sure it took years to be ahead considering the fees and loads

These days, 5 years isn't a useful metric at all ... since the GFC all fund performance returns have been goosed by QE 1-4 and related artificial support around the world. When 5 years passed since 'the bottom' fund managers and their PR folks were gleefully preparing new info sheets to show awesome 5-year performance to anyone who would listen.
For a mutual fund I will *start* at ten years. Right now, I want to see how a fund was positioned going into the GFC ... that to me gives great insight into how the managers think and how beholden (or not) to the Wall Street 'herd' mentality they are during the latest mania/bubble/groupthink. IE: were you an equity fund and lost only 20% in the GFC versus 35-40% in your same category? I'm interested....why was that?

Don't know about the timing question. Here's an answer to the Great Owl question: over the past three years, TRAMX has outperformed the average EM fund by 700 basis points/year. And over the past five years, it's up by 700 bps a year. And since inception it's up, though only by 150 bps/year. And, in each of those periods, it's been less volatile than the competition.
Weird, eh?
David

I remember the old Stein Roe Young Investors Fund in the 80s and 90s ... was "the" thing parents would gift to their kids and/or many people owned as their first investment, and I owned some myself. It owned the things a "young investor" would be interested in and/or using as they started their careers. But that was when folks entered the markets for long-term investments, not short-term hype-cycle-driven trading-through-ADHD. :/
Not sure how popular this latest thematic ETF will be though. Nevertheless, I wonder if GlobalX is already planning for the "Aging Millennials ETF" in a few years......because, hey, there's always someone willing to buy something, right?

From the WSJ (12/8/2008), writing about the Reserve Primary MMF:

in 2006, with the Primary Fund underperforming rivals, it went on a commercial-paper buying spree. It acquired so much of this higher-yielding but riskier asset that by September 2008, the fund's yield was tops in its class. But $785 million of that paper was Lehman's.

What's the difference between that and Rochester funds picking up junk or near junk to look better?
From WSJ (12/4/2013):

"That greater yield comes with higher risk. ...
"I don't think there was reaching for yield going on," says Daniel Loughran, head of the Oppenheimer Rochester muni funds, whose Oppenheimer Rochester Virginia Municipal tops Morningstar's list for Puerto Rico holdings, at 33%. ...
Morningstar's Mr. Jacobson cautions investors, however. In a competitive environment, "there is always something you can do to goose the income of a bond fund and pick up those extra sales," he says. "The temptation is always there."

Rochester funds have done this for years (perhaps forever?).
Is that looking out for your interest or facilitating placing a bet? Both are legal.
I'm not sure if "shareholders" (above) is a reference to the fund shareholders or the bond holders (who own bonds, not shares). If the former, it seems to me that they invested knowing they were getting higher than market yield and with that comes risk. More risk than with Reserve Fund Primary MMF.
If the latter, what does "make whole" mean? For vulture investors who purchased the bonds for pennies on the dollar because the bonds priced in risk, does it mean simply recognizing that risk and getting back, perhaps, the same pennies on the dollar? Or does it mean getting $1 back at maturity on a bond for which they paid perhaps 40c?
I'm no Trump, but I do hold a couple of PR bonds and I'm happy to take a haircut along with him to reduce my chances of taking bigger losses later. That might mean accepting lower interest payments (but still expecting principal returned at maturity), or extending the maturity of the bond, or something more substantial. Note that even if I get interest when due and just have to wait longer for the bond to mature does not make me whole.

FYI: Is that gift horse 401(k) plan you have a good deal? Have you examined its teeth?
Maybe it’s time.
The issue here is simple. This gift horse is one you may have to ride until you retire. When 401(k) plans got their start 30 years ago they were imagined as a supplement to pension plans. Today they are the main deal for retirement saving
Regards,
Ted
https://assetbuilder.com/knowledge-center/articles/how-good-is-your-401(k)-plan

The March 2016 Kiplinger's magazine "Annual Mutual Fund Issue" section ranks NASDX, for large growth:
#3 for 3 years;
#1 for 5 years; and
#4 for 10 years.
In each instance, it beats out USNQX.

VTSMX has outperformed VFINX from 4/27/92 to 5/5/16, returning 710.70% cumulative vs. 695.03% (dates chosen by M*'s system).
Over the past 10 years (5/6/06 to 5/5/16), VTSMX has outperformed 90.28% cumulative vs. 89.28% (yes, exactly 1.00% difference).

It looks like you're right about K shares being for supermarket platforms. It's a particularly nasty example of an NTF fund, though.
Most NTF funds add 25 basis points (often via a 12b-1 fee) to pay for the NTF platform. This one adds 50 basis points - 25 as a 12b-1 fee, and another 25 basis points for "Shareholder Services". You have to dig through the footnotes for this; the fee is buried as a part of "Other Expenses"
According to the semi-annual statement, Note 2, these are to compensate "other service providers ... for providing certain services to clients owning K Shares, including processing purchase and redemption transactions, assisting in other administrative details and providing other information with respect to each Fund. "
It gets better. In the 2000s, Schwab instituted a policy that required any fund on its NTF platform to sell its cheapest retail class NTF. That seems to be in play here. Since NASDX isn't sold NTF, Schwab so won't even sell NDXKX (allowing redemptions only).
The difference between USNQX and NASDX seems huge - about 2/3% per year over the past five years with only a tiny difference in ER. I'll have to look into their methodologies. At first glance this does seem to show that index funds are not fungible - management and methodology matter.

Usually these are just fluff pieces, but this one makes playing "spot the error" too easy.
"Every investor should have some exposure to the S&P 500 index"
Why should I bias my portfolio toward large cap vs. say, VTSMX?
"Your return [on $10K] in the SNPBX would be $36,784 — a roughly 270% return"
That would be a roughly 370% return. Rather, the total value of the investment, including both the original cost and the return would be $36,784.
The number is way off anyway. It assumes that the ER of the class B shares doesn't change for 30 years. But the class B shares convert to cheaper class A shares after 8 years, so the return is significantly higher than shown. Obviously still less than that of truly inexpensive funds.
This share class isn't open for sale. Even existing shareholders couldn't buy additional B shares after May 1, 2015.
You have to wonder how much the writer understands index funds when he includes a Fidelity (enhanced) index fund FLVEX among the most expensive in a category (large cap value). Only TIAA-CREF has a lower cost enhanced LCV index fund (per M*).

Ha! Ha! I took some off the table Tuesday and Wednesday. Since I am apparently part of the herd we probably will regret it. Junk bonds are still hovering just a few percent off historical highs on a total return basis. It's the bank loans that baffle me. They seem immune to everything. My largest holding is EVFAX and like many there have had but two or so down days since February. And EABLX below has had zero down days since February. Talk about trend persistent! Just wonder when the inevitable pullback comes in that category if it will be short and sweet or drawn out.
http://stockcharts.com/h-sc/ui?s=eablx

I think perhaps you have some recency bias on bank loans. Down past two years, and the run up has been the past few months. Same with HY, timed a buy on HYB just right and seems like I did great, and I did, but way off it's 52 wk high and many are flat or even still down over the past year in that space. All depends on when you bought.

Thanks for the perspective TSP.
While there's no way (that I know of) to predict what any market will do in the next year or two, over the past decade or so most of those invested in equities should have made money. (John Hussman's an exception.) NASDAQ, of course, is still recovering from a huge bubble where it quadrupled from around 1,000 to 5,000 between '95 and 2000 when it burst. Those who bought the Kool-Aid late in the bubble probably deserved what they got. I don't think the DJI and S&P experienced anything near that kind of bubble. But, who knows? Anything could happen. That's why you get paid to take extra risk in the markets.
Quality of life? We take so much for granted. When I was a kid we had 3 black & white TV stations to choose from. We had to run over to the TV about every 10 minutes to adjust the vertical or horizontal hold so picture would stop rolling or blurring. Few cars had power brakes or power steering. Air bags were unheard of. Flat tires along the road were common. You'd better know how to use a car jack. So ... we have such a higher quality of life today. OK - I'm getting old. But, even over 10 years, the quality of life for most (not all) Americans has increased immensely.
The one painful issue is that we've experienced a market crash and strong deflationary undercurrents within the past decade. This has depressed some prices (like energy). But, perhaps more noticeably, it has led to wage stagnation in many sectors, so the average worker is suffering from stagnated income. Hopefully that will improve as the effects of the '08 crisis wane. FWIW

Same theme not quite the alarm .
Macro View
Complacency in Uncharted Waters The next challenge for central bankers is changing monetary policy when the economy has come to depend on it.
May 03, 2016 Global CIO Commentary by Scott Minerd
...Another market area that is clearly not behaving according to the central banks’ script is foreign exchange. Japan’s current laundry list of woes is topped by the strengthening yen, which is a major headwind for its moribund economy. The Bank of Japan is due to convene later this month, and may decide that the best course of action is to intervene directly to drive down the value of its currency. Such direct intervention basically will entail selling yen and buying U.S. dollars, and typically those dollars go to buy U.S. Treasurys. Europe is probably not far behind: It has tepid growth, a strengthening currency, and more potential downside to their policy rates. This means there is a high likelihood of a fairly good bid on Treasurys in the coming weeks that could be sufficient to push the 10-year U.S. Treasury note lower.
My message to central bankers is the following: Although the waters at the present time might seem calm, they are still uncharted and there are risks beneath the surface. QE and negative interest rates, once thought to be extraordinary measures, have become the new monetary policy orthodoxy in the largest developed economies. The data on the long-run effects are limited, but real-time experience with these policies offers a few lessons.
...we learned from Japan that ever larger doses of unconventional monetary policy may be required in the absence of growth-enhancing structural reforms. Moreover, it is incredibly difficult to reverse these policies from an economy that has come to depend on them. Second, in Europe we are learning that such policies offer limited benefits unless paired with a coordinated fiscal plan. Finally, we have learned here at home that trying to “normalize” policy, even in a gradual manner, can strain financial markets.
https://guggenheimpartners.com/perspectives/macroview/complacency-in-uncharted-waters
Also
Markets and life since 2006.
10 Stats About the Last 10 Years
May 02, 2016 By Nicholas Colas who is is Chief Market Strategist for Convergex.
Summary: The headline today that Goldman Sachs’ stock has gone nowhere for a decade got us thinking about general market performance over the last 10 years. The key contours are straightforward: subpar price returns (a 4.9% compounded annual growth rate for the S&P 500) with increased volatility (a VIX that is 25% more volatile than average). From there, things get funky.
Think back over the last 10 years - how different was your life in April 2006? While you may think your daily existence is largely the same (maybe the kids are older or you’re married now, but that about it…), consider what was actually different about your life in the spring of 2006:
No iPhone. Steve Jobs unveiled the first iPhone in January 2007, and it didn’t ship until June of that year.
No Facebook (unless you were in college at the time). Facebook only opened to the general population in September 2006.
No Twitter. The full version of the product launched in July 2006.
No Instagram. The picture sharing site only launched in 2010.
No Kim Kardashian. “Keeping up With The Kardashians” debuted in October 2007.
No Uber. The company received its seed funding in 2009.
No iPad. Apple started taking pre-orders on the first-gen product in March 2010.
It feels like April 2006 demarcates the last days of some Dark Age, or at least a simpler time without the manifold distractions of today. And while you might opt for a world without the Kardashians, imagine it without your smartphone, Facebook/social media, and an iPad to entertain the kids (or yourself). It’s ok – don’t panic. You have them now.
The journey from April 2006 to April 2016 in financial markets has, of course, been a wild ride. But just as it is hard to remember what daily life was like a decade ago, it is also easy to forget some of the important waypoints that capital markets took from there to here.
Here are 10 data points about the last 10 years we hope you will find useful:
http://www.convergex.com/the-share/10-stats-about-the-last-10-years

IWIRX is surely doing a lot better than its stablemates, particularly Alternative Energy, Global Energy, and Asia Focus. G-A made its mark with the China-Hong Kong fund several years ago, but that one has faded also. I'm surprised the firm is able to retain talent given its overall weakness.

https://finance.yahoo.com/news/stan-druckenmiller-the-bull-market-has-exhausted-itself-210803739.html
Legendary hedge fund manager Stanley Druckenmiller, who runs Duquesne Capital, says that “the bull market has exhausted itself” after eight years of a “radical monetary experiment.”com/news/stan-druckenmiller-the-bull-market-has-exhausted-itself-210803739.html
I'm selling my home and buying a RV to live in instead of buying gold.

Hi, Ben.
Not sure about the 2-3 year holding pattern thing. They crushed the competition 3 years ago and crushed them 2 years ago then trailed for the first 3 quarters of 2015 then outperformed in the 4th quarter. They're trailing this year. Over the whole period from Jan. 2015 to now, they trail their peers by 5% cumulative.
Innovators, to them, do stuff like high levels of employee training and product refinement (think of it as "continual internal upgrades"). But they also look for businesses that won't flame-out which means many quarters of cash-flow growth. Tesla, cool as they are, posted losses of $0.54 share with a share price of $225. They also lose $30,000 on every high-end car they sell. That's not a profile these guys would get within a mile of.
David

If we're including multi-billion funds, one I like is American Century Mid Cap Value, ACMVX. (Before anyone writes that this is closed, look again. It is only closed when purchasing through a third party, e.g. Schwab.)
I ran a search for small funds in the small cap value space, and ran across LSV Small Cap Value (LVAQX). In some senses, similar to TDVFX (tiny AUM, tiny cap). Not quite deep value though. Even lower turnover (15%). And fine performance so far (three years old - see original share class LSVQX).
This seems like a quant fund with training wheels. It keeps its sectors within 5% of its benchmark - I'm guessing that this could explain the low turnover, since quant funds are often whipsawed.

IWIRX does have a stellar record but seems to be just holding serve over the last 2 to 3 years. The managers' explanation of what "innovation" means to them is a head-scratcher for me. A look at fund holdings reveals a collection of mostly solid large cap tech US companies who certainly spend something on R&D, but not firms I think of as terribly innovative. I'd expect to see the likes of Tesla and something in health and medicine (although GILD is included). I do like the choice of Wisdom Tree as a holding. I've owned G-A funds in the past and I have reduced Matthews in favor of Seafarer and Grandeur Peak.

Thanks for the background. It explains why Putnam is giving up on Voyager.
Years ago, it used to be a well respected, well known fund. For part of the 90s, it was the largest holding in my 401k plan (until my company dumped Putnam for Merrill Lynch).
Looking over the management history, it seems that Marsh & McLennan (former owners of Putnam) made hash of the fund after that, with rapid management turnover and of course with the 2003 timing scandals. The longevity of the immediately preceding manger (2008-2016) might be explained by Putnam having been bought in 2007. Just a guess.
FWIW, Putnam VT Voyager (the VA clone of Voyager) is similarly being merged into Putnam VT Growth Opportunities.

from our May commentary on the merger, for what interest it holds:
Putnam Voyager Fund (PVOYX) is merging into Putnam Growth Opportunities (POGAX) on July 15, 2016. Voyager’s performance was rightly described as “dismal” by Morningstar. Voyager’s manager was replaced in February by Growth Opportunities', after a string of bad bets: in the past six years, he mixed one brilliant year with two dismal ones and three pretty bad ones. He was appointed in late 2008 just before the market blasted off, rewarding all things risky. As soon as that phase passed, Voyager sank in the mud. To their credit, Voyager’s investors stayed with the fund and assets, still north of $3 billion, have only recently begun to slip. The new combined fund’s manager is no Peter Lynch, but he’s earning his keep.
David