Beating the market does not require making a profit. The definition of beating the market is to have a higher positive return in positive years and a lower negative return in negative years.
It could happen that the lower negative return is actually a positive, but that is rare. Losing 3% when the market is losing 8% is considered beating the market just as effectively.
Another question: does the FASB require that funds report their results in a uniform way? For example: Fund “X” starts the year with a porfolion of $2 billion. It ends the calendar year with $3 billion-is their return 50%?
Or are they required to calculate their percentage return by tallying up all the transactions over the year, and comparing that return with the initail value at january 1st?
Index funds generally outperform actively managed funds, but it may nevertheless be rational to use active management for a portion of your assets, see http://knowledge.wharton.upenn.edu/article.cfm?articleid=2702.
The Securities and Exchange Commission has detailed requirements, set forth in Item 26 of Form N-1A, http://www.sec.gov/about/forms/formn-1a.pdf, for calculating mutual fund performance data.