Survivor bias doesn't really matter here, because we're looking at only the best. In order to properly correct for survivor bias, you'd have to count the # of

Survivor bias doesn't really matter here, because we're looking at only the best. In order to properly correct for survivor bias, you'd have to count the # of funds that were created in the past 40 years, and then figure out (assuming a normal distribution of performance), what you expect the best fund performance to be. He has to beat that number to be considered genuinely better (rather than being the luckiest). For example suppose that the volatility of the S&P 500 is 10% per year. In a 40 year period, the volatility is thus 0.10 times sqrt(40), the central limit theorem, or 63%. So, a 1 standard deviation move in the S&P 500 over 40 years is 63%. To outperform by 2% per year, is 1.02^40 = 2.28 = 128% gain. 63% * 2 = 126% So, this guy performed two standard deviations above the mean over 40 years. That certainly is within the realm of random chance, considering he was the best/luckiest. Therefore, I conclude he did not outperform the market by a statistically significant margin. Actually, I'd expect the best fund to be 3 or 4 standard deviations above the mean (given the # of funds), so this result is an argument AGAINST active managers. Actually, the volatility of the S&P 500 is more than 10%, so I overestimated his performance. It's closer to 15% long-term, but it's varied a lot over 40 years.