US Active/Passive Barometer Report: Mid-Year 2026

Source: Morningstar. Data as of June 30, 2026.

Source: Morningstar. Data as of June 30, 2026.

Source: Morningstar. Data as of June 30, 2026.

• The US large-cap equity market has been a difficult place for active funds to succeed in the long run. Just 13% of them survived and beat their average passive rival over the decade through June 2026. That fell well short of the 25% and 29% success rates for active mid- and small-cap managers, respectively. 
• Active large-growth strategies have had a particularly hard time delivering value for investors. Of the active funds that existed in this category two decades ago, 66% closed, and less than 1% managed to outperform their average indexed peer. 
• Active US large-cap managers added to their woes during the 12 months through June 2026. Their 27% success rate marked a 5-percentage-point decrease from the year prior. Active large-value managers saw the largest drop in one-year success rates, going down to 32% from 47%, while large-growth funds declined 11 percentage points. Active large-blend managers bucked the trend by increasing their success rates by 7 percentage points over the past year.
• Expensive active large-cap funds must overcome long odds to succeed: Just 9% of them beat a composite of their passive peers over the decade through June 2026, compared with 22% of the cheapest quintile of active large-cap strategies. Investors mostly favor cheaper, better-performing active large-cap funds: The average asset-weighted active return exceeded the average equal-weighted active return across all periods for large-cap growth and blend categories. Active US large-cap value investors selected wisely over the long term, but recently their fortunes flipped as the average equal-weighted active return exceeded the average asset-weighted active return for the trailing one- and three-year periods. 
• Over the decade through June 2026, passive large-growth funds beat their active peers by 2.0 percentage points annualized by asset-weighted average—the widest performance margin between active and passive funds by category. Passive funds in the large-blend category posted the second-highest advantage at 1.3 percentage points, while active and passive large-value funds were evenly matched at 11.7% annualized apiece. 
• Surviving active funds’ median 10-year excess returns were negative across all three US large-cap categories, and the distributions of excess returns had a negative skew. Not only was the likelihood of picking a successful active fund low, but the penalty for poor manager selection also far outstripped the reward for choosing a winner. 

Source: Morningstar. Data as of June 30, 2026.

Source: Morningstar. Data as of June 30, 2026.

Source: Morningstar. Data as of June 30, 2026.

• Of the active mid-cap funds, 47% survived and outpaced their average passive peer in the 12 months through June 2026, an increase of 19 percentage points from a year earlier.

• Active funds in all three mid-cap categories saw their success rates rise between 16 and 20 percentage points.

• Active mid-cap value funds were a bright spot for active managers, with a 54% success rate in the 12 months through June 2026.

• Active mid-cap value funds were the most successful among all US equity categories over the past 10 years, with a 34.7% success rate.

• Mid-cap funds hunt at the “crossroads” of large- and small-cap companies, which leads to portfolios that bleed into other market-cap segments and oscillating success rates. Indeed, success rates for active mid-cap strategies tended to be more volatile than large- or small-cap categories in recent years. 

Source: Morningstar. Data as of June 30, 2026.

Source: Morningstar. Data as of June 30, 2026.

Source: Morningstar. Data as of June 30, 2026.

• Active small-cap strategies’ success rates trended higher in the 12 months through June 2026. Nearly 49% survived and outpaced their average passive rival, an 18-percentage-point increase from the year earlier. 
• Long-term active success rates have been higher in the small-cap arena than those among large-cap funds. One reason is that the small-cap market is priced less efficiently. 
• Relative success versus large caps hasn’t amounted to much for active small-cap managers. Just 29% survived and outperformed their average passive peer over the decade through June 2026. Still, active small-growth and small-value managers were the second (34.5%) and third (34.1%) most successful, respectively, among all US equity categories over the past 10 years, only topped by active mid-cap value managers by less than half a percent (34.7%). 
• Cost was a key differentiator among active small-value funds, where the cheapest quintile was nearly twice as likely to succeed as the most expensive quintile.

Source: Morningstar. Data as of June 30, 2026.

Source: Morningstar. Data as of June 30, 2026.

Source: Morningstar. Data as of June 30, 2026.

• Active managers who weave global- or foreign-stock portfolios succeeded at a 43% rate for the 12 months through June 2026, in line with the prior year. Active diversified emerging-market funds increased their success rates at the highest clip of any international stock category (35 percentage points) to 70%. The success rates of other foreign-stock and Europe-stock managers declined by at least 13 percentage points from the year prior. 
• The global- and foreign-stock categories have been a bit kinder to active managers than US market segments. At 27%, their 10-year success rate measured up better than the 20% rate for active US stock funds. 
• Active managers in the foreign small/mid-blend category have struggled to keep their funds on the market. At 39%, this category’s 10-year survivorship rate ranked the lowest among all categories tested. 
• Diversified emerging-market funds often come with higher fees than domestic strategies, which gives cheap funds in those categories a greater advantage. Indeed, the cheapest quintile of active funds (52%) was almost twice as likely to beat its average passive peer as was the most expensive quintile (27%) over the past 10 years. 

Source: Morningstar. Data as of June 30, 2026.

Source: Morningstar. Data as of June 30, 2026.

Source: Morningstar. Data as of June 30, 2026.

Source: Morningstar. Data as of June 30, 2026.

Source: Morningstar. Data as of June 30, 2026.

Source: Morningstar. Data as of June 30, 2026.

• Over the decade through June 2026, 43% of actively managed real estate funds survived and beat their average passive peer, trailing only fixed income among category groups tracked in this study. 
• Active global real estate managers had the highest one-year success rate (74%) among all categories in this study, up 60 percentage points from the previous year.
• Success rates in the global real estate category fluctuate dramatically over shorter time horizons. This owes to the diversity of funds within the category. Some invest exclusively outside the US, while others are more truly global. Passive strategies tend to disproportionately invest in international-only portfolios, so differences in performance between US and ex-US real estate securities cause active managers’ success rates to ebb and flow. 
• Active US real estate managers were near evenly matched with the average passive peer, posting a 53% success rate, while fund closures were identical, with three active and three passive funds shutting down during the 12 months through June 2026.

Source: Morningstar. Data as of June 30, 2026.

Source: Morningstar. Data as of June 30, 2026.

• Active bond managers’ success rates increased for all three fixed-income categories over the 12 months through June 2026. Active intermediate core bond managers paced the group, with a success rate of 66%, representing a 17-percentage-point increase from the year earlier. Active corporate bond managers had the most drastic climb in the success rate of fixed-income categories. It jumped 30 percentage points to 34%. Active high-yield bond managers followed the trend, as their success rate climbed 23 percentage points to 45%. 
• Actively managed bond funds tend to take more credit risk than indexed peers in each of the three categories included in this study. That has broadly worked for them over the past year, as credit spreads have remained fairly tight through increased geopolitical conflicts. 
• Fixed income has been a fertile hunting ground for active managers. Over the past decade, 45% survived and beat their average passive peer, the highest among all categories included in this study. The reward for picking a successful active bond manager also outweighed the penalty of failure, based on positively skewed 10-year excess returns. The value proposition for going active in fixed income remains strong.

Source: Morningstar. Data as of June 30, 2026.

Source: Morningstar. Data as of June 30, 2026.

Source: Morningstar. Data as of June 30, 2026.

Morningstar’s US open-end and exchange-traded funds database.

All ETFs and open-end mutual funds (excluding funds of funds and money market funds) in each Morningstar Category that existed at the beginning of the relevant period (including funds that did not survive to the end of the period) defined the eligible universe. To be included, the fund’s inception date must precede the start of the period and the obsolete date cannot predate the start of the period. In addition, each must have asset data for at least one share class in the month prior to the start of the sample period (the beginning of the trailing one-, three-, five-, 10-, 15-, or 20-year period) to facilitate asset weighting.

To calculate survivorship, we divide the number of distinct funds (based on unique fund ID at the beginning of the period) that started and ended the period in question by the total number of funds that existed at the onset of the period in question (the beginning of the trailing one-, three-, five-, 10-, 15-, or 20-year period).

We calculate the asset-weighted returns for each cohort using each share class’ monthly assets and returns. When an active fund becomes obsolete, its historical data remains in the sample. Funds that incept or migrate into the category after the start of the period are not included. The passive composite takes the start of period asset-weight and applies that weighting to performance throughout the period. When a passive fund becomes obsolete, its starting weight is subsumed by the passive composite using their pro rata starting weights.

In order to come up with a single return figure for funds with multiple share classes, we first calculate the asset-weighted average of all the fund’s share classes. We then take the simple equal-weighted average of the monthly returns for each fund in the group and compound those returns over the sample period. As before, when a fund becomes obsolete, its historical data remains in the sample. Funds that incept or are moved into the category after the start of the period are not included.

The success rate indicates what percentage of funds that started the sample period went on to survive and generate a return in excess of the asset-weighted average passive fund return over the period. This approach differs from the convention of using a single, representative index to gauge success. We do not consider magnitude of outperformance in defining success: A fund that just barely beat the passive alternative counts as much as a fund that significantly outperformed. 

As in the equal-weighted return calculation, we calculate the asset-weighted average of all the fund’s share classes to come up with a single return figure for funds with multiple share classes. We then rank the funds by their composite returns, count the number that rank higher than the equal weighted average return for the passive funds in the category, and divide that number by the number of funds at the beginning of the period (using the same number from the denominator of the survivorship calculations).

We rank each fund by its annual report expense ratio from the year prior to the start of the sample period and group them into quintiles. We then apply the same steps described above to calculate the success rates for funds in each quintile. To be counted in the starting number of funds used for purposes of calculating the survivorship and success rates, each fund must have an annual report expense ratio at the beginning of the sample period.

We measure surviving active funds’ excess returns relative to the asset-weighted average passive fund return in each category.

Our “benchmark” for measuring success is different from others. We measure active managers’ success relative to investable passive alternatives in the same category. For example, an active manager in the US large-blend category is measured against a composite of the performance of its index mutual fund and ETF peers (for example, Vanguard Total Stock Market Index VTSMX, SPDR S&P 500 ETF SPY, and so on). Specifically, we calculate the equal- and asset-weighted performance of the cohort of index-tracking (that is, “passive”) options in each category that we examine and use that figure as the hurdle that defines success or failure for the active funds in the same category. The magnitude of outperformance or underperformance does not influence the success rate. However, this data is reflected in the average return figures for the funds in each group, which we report separately.

We believe this is a better benchmark because it reflects the performance of actual investable options and not an index. One cannot directly invest in indexes. Their performance does not account for the real costs associated with replicating their performance and packaging and distributing them in an investable format. Also, the success rate for active managers can vary depending on one’s choice of benchmark. For example, the rate of success among US large-blend fund managers may vary depending on whether one uses the S&P 500 or the Russell 1000 Index as the basis for comparison. By using a composite of investable alternatives within funds’ relevant categories as our benchmark, we account for the frictions involved in index investing (fees, as well as others), and we mitigate the effects that might stem from cherry-picking a single index as a benchmark. The net result is a much fairer comparison of how investors in actively managed funds have fared relative to those who have opted for a passive approach.

We measure each fund’s performance based on the asset-weighted average performance of all of its share classes in calculating success rates. This approach reflects the experience of the average dollar invested in each fund. We then rank these composite fund returns from highest to lowest and count the number of funds with returns exceeding the equal-weighted average of the passive funds in the category. The success rates are defined as the ratio of these figures to the number of funds that existed at the beginning of the period. Given this unique approach, our field of study is narrower than others, as the universe of categories that contained a sufficient set of investable index-tracking funds was fairly narrow at the end of 2004. We expect the number of categories we include in this study will expand over time.

We cut along the lines of cost. Cost matters. Fees are one of the best predictors of future fund performance. We have sliced our universe into fee quintiles to highlight this relationship.

Morningstar Manager Research provides independent, fundamental analysis on managed investment strategies. Morningstar views are expressed in the form of Morningstar Medalist Ratings, which are derived through research of three key pillars—People, Process, and Parent. The Morningstar Medalist Rating is the summary expression of Morningstar’s forward-looking analysis of investment strategies as offered via specific vehicles using a rating scale of Gold, Silver, Bronze, Neutral, and Negative. A global research team issues detailed research reports on strategies that span vehicle, asset class, and geography.

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