Which of the following statements about mutual funds is true?

Multiple Choice

• Actively managed mutual funds tend to underperform passive funds as well as their benchmarks

• The return investors earn in an actively managed fund measures the skill of the manager managing the fund

• If managers are skilled, fund returns would persist and they should beat the market consistently

• Because there is no persistence in mutual fund returns, picking funds on the basis of past returns is irrational

• Because the average return of all actively managed funds does not beat the market, the average manager is not skilled and therefore does not add value