Active vs. Passive Mutual Fund Performance: When Do Active Managers Win?

US actively managed mutual funds and ETFs made up some ground from but still lagged their average passive peer from July 2025 through June 2026. Just 40% of active strategies survived and beat their asset-weighted average passive composite, an increase of 7 percentage points from a year earlier.

That did little to change their long-term track record. Just 25% of active funds survived and beat their passive counterparts over the decade through June 2026.

But some active funds are worth the premium in fees and expenses.

Morningstar’s investment research assesses the long-term success rates of active funds compared with passive funds. Here are the categories where actively managed funds stood out and where they fell short.

For a full breakdown, download the free Active vs. Passive Barometer report.

• US
• Europe
• China
• Australia

Each edition offers a regional deep dive, but across all reports a common theme emerges in investor behavior when it comes to fund flows.

Total assets in US passive mutual funds and exchange-traded funds first surpassed those in active ones in 2024—and the gap has continued to widen. Recent data show that passive strategies continue to dominate investor demand, capturing the majority of new inflows across key asset classes, particularly in US equity funds.

Active investing strategies often come with higher expenses for manager skills, involvement, and specialized analyst teams. Over the past decade, inflows in the United States have tilted toward passive funds with consistent outflows from actively managed strategies and strong inflows into passive vehicles reflecting demand for cost-efficient, broad market exposure.

In Europe, the shift toward passive investing persisted in the second quarter of 2026. Passive equity funds gained a staggering EUR 89.9 billion in net inflows, while active equity funds experienced EUR 17.8 billion in outflows.

Overall, passive funds attracted EUR 128.5 billion, led by ETFs with EUR 94.6 billion, while active funds gathered EUR 59.4 billion, mostly into traditional open-end vehicles. European funds recorded EUR 188 billion of inflows, down from EUR 203 billion in the first quarter, as escalating tensions in the Middle East weighed on investor risk appetite.

Our researchers used Morningstar’s comprehensive fund data to calculate a category’s success rate, or the percentage of active funds that survived and outperformed a composite of passive funds over time.

Why a composite?

This “benchmark” reflects the net-of-fees performance of investable passive funds. It factors expenses into analysis for a more parallel look at trends in active-fund success.

As of the end of June 2026, the report spans:

• Nearly 9,226 unique US funds with approximately USD 29 trillion in assets, or about 67% of the US fund market.
• Around 32,000 unique active and passive European funds that account for about half the assets of the European fund market.
• 4,480 unique China funds that were alive at the start of the trailing one, three, five, or 10 years ended Dec. 31, 2024.

US actively managed mutual funds and ETFs still lagged their average passive peer from July 2025 through June 2026 with 40% of active strategies surviving and beating their asset-weighted average passive composite.

The US large-cap market has been particularly challenging for active managers due to its high transparency and efficiency, which leaves little room to add value over representative indexes. Just 13% of them survived and beat their average passive rival over the decade through June 2026.

Across large-cap categories, the distribution of 10-year excess returns skewed negative for surviving active funds. That indicates the penalty for picking an unsuccessful manager outweighed the reward of finding a winner.

Active large-cap funds in other regions also struggled to beat their passive peers. Faced with the strong tailwind behind market indexes in the eurozone, those large-cap managers notched a 19.7% success rate in June 2026. However, the one-year success rate for active managers in the UK large-cap equity category has collapsed—from 47% in June 2025, it dropped to 27.3% at the close of 2025 and further to 15.6% in June 2026.

All told, these are some US active fund categories that fell behind their passive counterparts from July 2025 through June 2026:

• Large-cap fund managers had a 27% success rate.
• Mid-cap fund managers had a 47% success rate.
• Corporate-bond fund managers had a 33% success rate.

In Europe, these active fund categories trailed passive peers over the 12 months:

• Europe ex-UK equity funds had a 23.1% success rate.
• Europe small-cap equity funds had a 32.2% success rate.
• Eurozone large-cap equity funds had a 19.7% success rate.
• Eurozone small-cap equity funds had a 22.4% success rate.

Generally, active managers tend to achieve higher success rates in less efficient markets where a sufficient advantage can be found.

Active fund performance varies across investment categories and periods. In some regions, they remain the dominant approach in assets under management.

Active US bond managers’ fortunes reversed following a disappointing first half of 2025. Across the three fixed-income categories included in the study, success rates shot up 22 percentage points to 52%.

Active intermediate-core bond managers led the cohort with a 66% success rate, while active corporate-bond managers’ success rate jumped to 34% from 4% in 2025.

European active managers’ weighted average success rate over one year came in at 46.8% at the end of June 2026 for the 21 bond categories examined.

Over longer horizons, the success rate for active bond managers falls as the benefits of compounding low fees charged by passive funds kick in. The three-year success rate stood at 51.1% at the end of June 2026, going down to 47.5% over five years and to 33.% over the 10-year period. Success rates for active bond managers are consistently higher than for their equity counterparts. This neatly encapsulates the fact that indexing is less efficient for bond markets than for equity markets.

The global- and foreign-stock categories have been a bit kinder to active managers than the US market segments. At 27%, foreign-stock funds’ 10-year active success rate measured up better than the 20% rate for active US stock funds.

International-stock managers held steady at a 44% success rate for the 12 months through June 2026. Active diversified emerging-market funds had the second-highest success rate among all categories in this study at 70%, a 35-percentage-point increase from last year.

However, woes continued for active global large-blend funds, which combine foreign and domestic stocks, despite a small uptick in success rates. Just a third of global large-blend managers beat the passive benchmark in the 12 months through June 2026, up 7 percentage points from the year prior.

In Europe, the one-year success rate for active emerging-markets equity managers was a very solid 64.6% in June 2026. This is an area where mid- and small-cap companies, many of which are involved in tech activities, are underrepresented in indexes, which makes for relatively easy pickings for active managers if the market conditions are supportive.

Active vs. passive investing statistics can help professional investors calibrate the odds of succeeding with active funds and ETFs in different categories.

From there, how do you pick the winners to buy?

High tracking error and active share don’t guarantee superior performance but do offer one way for active funds to justify their fees. Some active funds closely replicate the asset weightings of an index fund, but at a higher price point.

Divide a fund’s active share or tracking error by its expense ratio and compare it to a custom benchmark or peer group.

This gives you one indicator of the difference between an active fund and its cheaper passive alternatives.

When evaluating active managers, our researchers consider factors such as the people managing the portfolio, their process, and whether the parent firm aligns its interests with investors.

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