“That’s because actively managed funds are forced by their mandates to sell shares when the market falls, locking in losses which can take many years to recover,” he said.

“In contrast, when a market correction isn’t based on fundamentals, direct share investors can choose not to sell their shares and wait for the market to recover – thereby avoiding locking in losses that the funds management industry can’t avoid,” said Dr Rumble.

“The peak regulator APRA stated clearly in its 2009 research on the performance of actively managed funds, that active funds tend to underperform their benchmark and that this underperformance was more pronounced in down markets.

“The traditional funds management industry and its service providers hide from this APRA research, which explicitly stated that APRA has doubts about the value of the active approach to risk management,” he said.