Actively managed funds continue to fall short of benchmarks
Updated
Updated · Reuters · May 4
Actively managed funds continue to fall short of benchmarks
14 articles · Updated · Reuters · May 4
In the first quarter of 2026, 60% underperformed, after U.S. mutual fund portfolios lagged their yardsticks by more than two percentage points on average in 2025.
S&P Dow Jones Indices found no fund category from 2009 to 2024 where most stockpickers beat benchmarks, while only 2% of large-cap funds stayed in the top half over five years.
Despite holding $18 trillion in U.S. assets, active funds still charge nearly triple passive peers' fees, helping drive roughly $3.2 trillion out of active U.S. equity funds since 2016.
As passive investing takes over, are we creating a 'ticking time bomb' for the next major market crash?
A 1940 law is blamed for Wall Street's failures. Are today's regulatory tweaks enough, or is the active management model fundamentally broken?
Why Only 38% of Active Funds Outperform as Active ETFs Surge to $1.5 Trillion AUM
Overview
In 2025, only 38% of active funds outperformed their passive benchmarks, hindered by high fees, market efficiency, and behavioral errors. Despite this, active ETFs attracted $450 billion in net inflows, driven by their structural advantages like tax efficiency and lower costs. This growth was supported by the resilience of active ETFs during the 2022 bear market and innovation in defensive strategies. To balance performance and cost, investors increasingly use a core-satellite approach, combining passive funds for broad market exposure with active strategies focused on less efficient markets such as credit. Looking ahead, AI's rise demands strong governance, while fee pressures push active managers to specialize in niche areas to deliver value.