I take a look at this paper also published in the CFA journal by David Gallagher (professor of finance at the UNSW Business School), Graham Harman (Russell Investments, Sydney), Camille Schmidt and Geoffrey Warren.
"We use portfolio holdings data to examine the performance of 143 global equity funds over the period 2002 to 2012. We find that the average global equity manager outperforms their benchmark by 1.2% to 1.4% per annum before fees. Attribution analysis reveals that the prime source of excess return relates to selecting stocks that beat their local markets. Modest contributions arise from country selection, most notably in emerging markets; while currency effects are mixed. Our findings support giving consideration to active management in global equity markets, at least for institutional investors who pay fees below 1% per annum."
There is evidence that some funds are "closet trackers" and not truly "active". In 2016, Esma, the European markets watchdog, said that up to a sixth of actively managed equity funds sold on the continent were potential closet trackers. If this is the case then possibly the average results for truly active managers should be better than what is reported too. It would be interesting to know the active share of the funds although I note this work has not been done in this case.
However it does seem that "retail investor" fees can be above 1% and that would negate the outperformance gained seen here. But institutions should be able to do better. The authors quote 70bps (0.7%) as a typical institutional fee. My reading of the literature would suggest moderately large institutional buyers can be paying a much lower rate than that.
"According to Mercer Investment’s Fee Survey 2006 (i.e. around the middle of our sample period), the average fee for global equity core segregated funds was 0.74% per annum for a US$25 million mandate and 0.50% per annum for a US$200 million mandate."
There has only been fee pressure since 2006.
"This article contributes to the understanding of active management in various ways. First, the finding that active managers generate significant outperformance in global equities calls into question whether the uninspiring performance of active management in US markets applies in other contexts. Second, we uncover evidence that the outperformance of global managers primarily relates to stock selection skill. Third, the fact that managers can source significant excess returns from emerging markets raises the possibility that the degree of market efficiency or segmentation might influence the capacity of active managers to outperform."
So Global managers do seem a different breed than US only managers according to this research.
"Regressions of fund excess returns on international factors suggest that benchmark-relative outperformance remains robust to common factor exposures, although loading towards small stocks appears to make a positive contribution"
This is also an interesting finding as it suggests that Global Managers could blend well with quantitative funds that make returns by accessing common factor exposures (for instance "smart beta" funds or those seeking exposure to a "value" or "volatility" or other common factor). Although I note the analysis in this respect was with a smaller sample and more (what I would call) exploratory.
To conclude:
"This study provides support for considering an active approach in global equity markets, subject to the fee paid by the investor and perhaps the ability to identify and access skilled managers. Given the evidence that the prime sources of excess returns relate to stock selection and emerging markets, there appears to be a case for considering managers that adopt a bottom-up approach and have emerging market capabilities. In contrast, the case for investing with top-down managers who focus on country selection as a driver of returns remains to be established. While it is still possible that a top-down approach could be successful, our analysis suggests that these skills are not broadly held across global equity managers."
The authors leave it as an open questions as to whether top-down eg global macro funds, can add any returns.
Another caveat is that I assume the database is the Russell Investment database and how selective that database might be could also be a cause of bias, which is not explored in the study.