tom cotter

First, S&P 500 maybe the wrong benchmark to use. There are dozens of indexes that measure small market segments. Many do not correlate to the main index. Which is a good thing. Finding the right combo of non correlating asset classes is a key to asset management. More important than outperforming an index is peer group performance. How did your manager do compared with managers trying to do the same thing? Most important is how did the investment do relative to your goals? If you need your portfolio to pull 8% a year to meet your goal, did it? If not,why not?
I'm sorry, I don't see poor performance relative to index funds. An index fund is a passive investment. While it may not be possible for a manager of a mutual fund to outperform their index year in and year out, even the mediocre ones can mitigate a loss. This was evidenced in the last bear market. In a down market an index fund assures that the investor will get the full ride down. There is noone to step in and slow the decent. That's a lot of risk to take. Even in up markets the best you'll do is what the market does minus the fund fee. Index funds,in my opinion, deliver to the investor a high risk ride for average returns. To overcome this flaw some investors try to time the market themselves. If you find one who can do it successfully have them call me. I'll give them my money to invest.
Two years is not nearly enough time to adequately measure performance. 5 or 10 years is closer to the mark. It's also important to see who owns the performance. Is the manager who delivered the numbers still the person calling the shots? Then there's style drift.
On the institutional side most managers get a two quarter pass. Underperform three quarters in a row it's time to dust off the resume. Mutual funds are a bit more forgiving, which keeps the managers from taking crazy shots just to save their jobs.

That we have varying or opposing view points is OK. Afterall, that's what makes a market.