‘Same Process’

“We have been using the same process to pick stocks for 40 years and we have confidence in it,” Frank Gannon, co-chief investment officer for Royce, said in a telephone interview.

In his view, the Fed keeping interest rates near zero for the past six years has had the “unintended consequence” of boosting the stocks of companies with heavy debt and little or no earnings.

Typically after a recession, such companies lose out to firms that generate more cash and have better balance sheets. This time, no “Darwinian” shakeout happened and low-quality stocks ruled, Gannon said.

“There has certainly been little reward for owning high-return, superior business models that are conservatively financed,” Neuberger Berman’s small-cap stock team wrote in an October 2013 paper titled “Is There Hope for Active Managers?”

Lockstep Movement

Stocks have moved in lockstep to an unusual degree since the 2008 financial crisis, a handicap for managers seeking to exploit market inefficiencies.

Monthly dispersion among Standard & Poor’s 500 Index members, a measure of how far individual stocks are swinging relative to the market, narrowed for a fifth year in 2014 and in August reached the lowest level since 1979, data compiled by JPMorgan Chase & Co. and Bloomberg show.

As stocks started moving more on their own this year, 46 percent of active managers were beating their benchmarks as of Jan. 31, according to Morningstar.

Regardless of whether the trend is turning, Jeff Tjornehoj, an analyst with Denver-based fund tracker Lipper, doesn’t buy the idea that certain types of markets are tougher on stock pickers.

“It sounds like a team complaining about the rain when everyone has to play under the same weather,” Tjornehoj said in a phone interview.

‘Ample Opportunity’

Jim Rowley, a senior analyst at Vanguard Group Inc., is also dubious of high stock correlation as an explanation. In each of the last eight years, at least 70 percent of the stocks in the broad Russell 3000 Index either beat or underperformed that benchmark by 10 percentage points or more, according to Rowley, whose firm is known for championing index funds.

“That would suggest there has been ample opportunity to pick winners and losers,” Rowley said in a phone interview.

Stock pickers also complain that markets have essentially gone up for six consecutive years, excepting a flat 2011.

“People speak as if we have gone through a whole cycle,” said Neuberger’s D’Alelio. “Show me a cycle where stocks go straight up with no corrections.”

The lack of market corrections has hurt Yacktman, who in 2009 was a finalist for Morningstar’s manager of the decade award.

“A lot of our outperformance comes in difficult environments,” said Jason Subotky, a co-manager on the $13.9 billion AMG Yacktman Fund and the $10.9 billion AMG Yacktman Focused Fund.