Active Australian equity managers have on average outperformed the market by just 10 basis points over the 12 months to 30 June 2011, returning 12 per cent on average compared with 11.9 per cent of the S&P/ASX 300 index, according to a Mercer survey.

"The average active manager did better than [11.9 per cent], marginally outperforming the market during the year by 0.1 per cent, not quite covering the cost of their fees," Mercer said in its Investment Manager Performance Survey.

In the top five of the best performing Australian equity managers over the period, BlackRock's long/short fund reached the top position with a return of 29.4 per cent, followed by Continuum Aggressive with 25.7 per cent, and Independent with 21.3 per cent.

However, last year these funds were among the worst performers; BlackRock Long/Short came in at 101 last year, while Continuum Aggressive did not come further than 140. Independent did relatively better last year at position 65.

The picture was similar among the worst performers this year, who were often last year's best performers.

"We call that mean reversion," Mercer Investment Consulting principal Dave Stuart said.

Stuart argued that investors should take a longer term view when assessing the returns of managers.

"I believe quite strongly in focussing on long-term numbers," Stuart said.

"My personal view is that the one-year numbers are dominated by luck and the three-year numbers are at least 50 per cent dominated by luck," he said. "After five years, it starts to get more meaningful," he said.

But Stuart also said the research showed that Australian managers still performed better on average than managers in markets abroad.

"The Australian market still stands out as a market with a very high manager performance," he said.

Stuart said that was not only due to manager skill, but also because there was a relatively large number of active foreign managers that are happy with obtaining index, or near index, results.

"There is a significant overseas presence that does not try to outperform the index," Stuart said.

Retail investors also take up a relatively large percentage of the market, and they do not have access to the same level of information, while they are faced with higher transaction costs than institutional managers.

The survey also found that enhanced index funds underperformed traditional index funds by 20 basis points last financial year, while their outperformance over the longer term remained relatively modest at 30 basis points over a 10-year period.