This article is for information and education only. It is not investment advice, and it does not recommend buying or selling any specific fund or security.
Most actively managed large-cap U.S. stock funds have trailed the S&P 500 over long holding periods: 85.98% underperformed the index over the ten years ended June 30, 2025, and 88.29% underperformed over fifteen years, according to S&P Dow Jones Indices' SPIVA U.S. Scorecard, mid-year 2025. The gap narrows in shorter, more volatile stretches, but it does not disappear, and cost is the biggest reason it persists.
How Is "Underperformance" Actually Measured?
SPIVA compares the total return of actively managed mutual funds, net of fees, against the S&P 500 (for large-cap U.S. equity funds) over rolling periods ending June 30, 2025, per SPIVA's methodology notes. Funds that closed or merged during the period are counted as underperformers to correct for survivorship bias — a methodology point that matters, because excluding failed funds would flatter active management's track record. Morningstar's Active/Passive Barometer uses a related but distinct approach: it measures "success rate," the share of active funds that both survived and beat the average of their passive category peers, across nearly all Morningstar categories, not just large-cap, per Morningstar's methodology. The two datasets are not identical, but they point the same direction.
How Many Active Funds Beat the S&P 500 Over 10 and 15 Years?
Per SPIVA, 85.98% of active large-cap funds underperformed the S&P 500 over the trailing ten years, and 88.29% underperformed over fifteen years, through June 30, 2025, SPIVA reports. Over twenty years the underperformance rate rises to 91.03%, per the same scorecard. Morningstar's midyear-2025 Active/Passive Barometer, covering 9,204 funds representing roughly $24 trillion in assets, found an overall ten-year active success rate of just 21% across all categories, and only 5.8% among U.S. large-blend funds specifically — the category closest to a broad S&P 500 comparison. Both measures describe the same pattern from different angles: the longer the horizon, the smaller the share of active managers who keep pace.
Does a Single Good Year Change the Long-Term Picture?
Not by much. Short-term results swing more than long-term ones. SPIVA found that 54.31% of active large-cap funds underperformed the S&P 500 in the first half of 2025 — worse than a coin flip for active managers, but a marked improvement from the 65% underperformance rate over full-year 2024, putting the industry "on track for the best year since 2022" by that narrower measure, per SPIVA. A single strong or weak year for active managers does not offset a fifteen- or twenty-year track record; it simply adds one more data point to a much longer series.
Does Fund Cost Explain the Gap?
Largely, yes. Morningstar's barometer found that cheaper active funds succeed far more often than expensive ones: over ten years, 27% of active funds in the cheapest quintile of their category beat the average passive fund in that category, compared with 15% for the priciest quintile, Morningstar found. The U.S. Securities and Exchange Commission's Investor.gov explains the mechanical reason costs matter so much: expense-ratio charges are deducted directly from fund assets on an ongoing basis, so, as the SEC's July 2025 investor bulletin puts it, "a fund with higher costs must perform better than a lower-cost fund to generate the same returns for you." Every fund — active or passive — carries an expense ratio, and every percentage point of that ratio compounds against an investor's balance every year the fund is held, regardless of how the manager performs. An active manager does not need to be a poor stock-picker to underperform a benchmark net of fees; a manager who matches the index's gross return before costs will still trail it after costs, simply because the index itself has none to pay. That structural headwind is present in every year, not only the difficult ones, which is part of why the underperformance rate compounds toward higher numbers as the measurement period lengthens.
What Does This Track Record Mean for a Long-Term Portfolio?
It does not mean every active fund fails, or that indexing is risk-free — index funds still carry full market risk and can decline sharply, as they did in 2022. What the SPIVA and Morningstar data show is a persistent base rate: across large samples and multiple time horizons, a small and shrinking minority of active large-cap managers has kept pace with a low-cost benchmark net of fees, across both datasets. For an investor building a portfolio over decades rather than quarters, that base rate is a starting point for evaluating any actively managed fund, not a verdict on a specific one — a fund's own materials describe its strategy and past results, but they are not independent evidence of how it will perform relative to an index in the future. Past performance, in every case here, describes what already happened over a stated period; it does not predict what will happen next.
None of this is a case for or against any specific fund, active or passive. It is a reminder that "beating the market" is a high bar that most funds charging for the attempt have not cleared over long stretches, and that the fee an investor pays every year is one of the few variables in a portfolio that is known in advance rather than left to chance.
For a related stocks perspective, read How S&P 500 Index Additions and Deletions Actually Work.
