Those mutual funds that seem to beat the market aren't actually geniuses; they’re mostly just getting lucky.
March 26, 2026
Original Paper
Autopilot Alpha: Anomalies Move, Mutual Funds Follow
SSRN · 6469201
The Takeaway
It is widely believed that top fund managers actively trade to capture market inefficiencies (anomalies). This study finds that 'alpha' isn't driven by clever trading, but by the stocks already in a portfolio mechanically morphing into those anomaly categories over time.
From the abstract
We test whether institutional investors intentionally exploit anomalies by decomposing changes in mutual fund factor loadings into active trading and passive mechanics - changes in the factor loadings of the stocks held in the portfolio. We replicate prior findings: funds with higher factor exposure outperform, and this advantage fades after academic publication. Yet we find no evidence of purposeful factor investment strategies. Fund exposure changes are predominantly mechanical: shifts in stoc