Moreover, strategies that account for predictable active management skills tilt more heavily toward mutual funds that overweight technology and energy stocks during recessions, and financial and metals stocks during expansions, indicating that business cycle variables are key to timing these industries. Remarkably, predictable skill strategies also choose individual mutual funds within the outperforming industries that, in turn, substantially outperform their industry benchmarks, even though these industry benchmarks do not account for any trading costs or fees. Specifically, an investor who allows for predictable manager skills optimally selects mutual funds that outperform their overall industry returns by more than their fees and trading costs. Thus, strategies that search for.
