Investing

Actively Managed Funds Fail to Beat Benchmarks

Morningstar reports that among active U.S. stock funds, the worst performers were small blend funds, of which only 32% beat their benchmarks in the past year.

By Lee Barney editors@strategic-i.com | August 23, 2017
Page 1 of 2

Morningstar’s mid-year 2017 Active/Passive Barometer found that most actively managed funds have failed to survive and beat their benchmarks, especially for funds with longer time horizons. The average dollar in passively managed funds typically outperforms the average dollar invested in actively managed funds, the research firm finds. Low-cost funds performed better than higher-cost funds.

Nonetheless, when compared to the trailing 12 months ended June 30, 2016, active funds’ success increased substantially in 10 of 12 categories in the year ended June 30, 2017. Forty-nine percent of active U.S. stock funds beat their composite passive benchmark in the 12-month period ended June 30, 2017, whereas only 26% had done so the year before.

Active funds in the large-, mid- and small-value categories had a combined success rate of 57% relative to their passive peers over the last 12 months.

Among active U.S. stock funds, the worst performers were small blend funds, of which only 32% beat their benchmarks in the past year. Last year, 46% of small blend funds beat their benchmark. The best performersamong active U.S. stock funds were small value and small growth funds, of which 58% and 61%, respectively, beat their benchmarks.

NEXT: Results by Category