A new Morningstar study covering $29T in fund assets finds active managers improving short-term, but long-term results remain stubbornly discouraging
Active fund managers notched meaningful short-term gains in the 12 months through June 2026, but only one in four active strategies survived and beat passive rivals over the past decade.
The latest Morningstar Active/Passive Barometer, authored by Bryan Armour, CFA, director of passive strategies research at Morningstar Manager Research in Chicago, alongside senior associate analyst Brendan McCann, CFA, and associate analyst Brian Paoli, examined approximately 9,226 unique mutual funds and ETFs representing roughly US$29 trillion in assets (about 67% of the total US fund market as of June 30, 2026.)
Just over 40% of active funds survived and outperformed their asset-weighted passive composite over the one-year period ending June 2026, a 7-percentage-point improvement from the year prior. But the 10-year picture remains a cautionary tale for advisors recommending actively managed vehicles: only 25% of strategies beat passive counterparts over that longer stretch.
The divergence between short- and long-term results underscores a pattern that independent financial advisors and wealth management professionals who follow fund research at InvestmentNews have long tracked — active managers can and do have good years, but sustaining outperformance at scale is the harder discipline.
Large-cap growth remains the hardest ground
No corner of the market has proven more inhospitable to active stock-pickers than US large-cap growth. Over 10 years, just 5% of active large-growth funds survived and beat their passive benchmark; the lowest of any category in the study.
Of the active large-growth strategies that existed two decades ago, 66% have since closed, and fewer than 1% managed to outperform over that span, according to the report.
US large-cap blend (10.5%) and large-cap value (25.5%) fared better on the same 10-year measure, though both still fell short of what most advisors would consider acceptable odds for recommending active over passive.
One-year results within large-cap were also mixed heading into mid-2026. Large-cap success rates fell to 27%, down 5 percentage points year-over-year. Large-value dropped sharply from 47% to 32%, while large-growth slipped from 28% to 17%. Only large-blend improved, rising from 24% to 32%.
Active mid-cap funds posted a 47% one-year success rate, up 19 percentage points from the prior year. Small-cap strategies did even better, with 49% clearing the bar — an 18-point improvement. Small-value led the small-cap pack with a 64% one-year success rate, up sharply from 32% the year before.
Over 10 years, mid-value (34.7%) and small-growth (34.5%) were the strongest US equity categories — still discouraging in absolute terms, but meaningfully better than large-cap.
Fixed income: the most consistent active hunting ground
Fixed income continued to outshine equities as a space where active managers reliably add value. Over the 10-year period, 45% of active bond funds survived and outperformed passive peers; the highest rate of any broad asset class in the study.
One-year results in fixed income improved dramatically: active bond funds posted a 52% success rate for the year ending June 2026, up 22 percentage points — the largest gain of any category. Intermediate core bond funds led with a 66% success rate, while corporate bond funds surged from just 4% to 34%.
Two categories saw dramatic one-year improvement. Diversified emerging markets funds recorded a 70% success rate for the year ending June 2026, a 35-percentage-point spike from the prior year and the largest single-year jump across all equity categories. Over 10 years, emerging markets active funds succeeded at a 37% rate — the best of any international equity category.
Active global real estate funds recorded the highest one-year success rate of any category studied: 73.7%, up from just 15% a year earlier, a gain of more than 58 percentage points. US real estate active funds also improved, reaching 53% for the year. Over 10 years, both US real estate (42%) and global real estate (45%) outpaced most equity category benchmarks.
Cost is the clearest predictor of success
Across all categories and time frames, the Morningstar data points to one variable with consistent predictive power: fees. Active funds in the cheapest cost quintile beat passive peers at a 33% rate over 10 years — versus only 20% for funds in the most expensive quintile. That 13-percentage-point gap held across asset classes.
In US large-blend, for example, the cheapest funds succeeded 23% of the time over 10 years, compared with 9% for the priciest. The spread was equally stark in emerging markets: 52% for the cheapest quintile against 27% for the most expensive.
The cost finding aligns with a broader pattern highlighted by the report's asset-weighted return analysis. Investors have, on balance, directed capital toward better-performing active funds: in 16 of 20 categories studied, the average dollar invested in active funds outperformed the average active fund on an equal-weighted basis, suggesting that advisors and their clients are gravitating toward lower-cost, higher-quality active strategies.
"Investors have chosen active funds wisely," the Morningstar report concluded. "Over the past 10 years, the average dollar invested in active funds outperformed the average active fund in 16 of the 20 categories examined. That implies investors favor cheaper, higher-quality strategies."
The mid-year 2026 barometer offers a nuanced picture rather than a simple verdict. Active management is not uniformly failing; it is category-dependent, cost-sensitive, and appears to be gaining traction in an environment where market dispersion is creating more room for skilled managers to differentiate.
The data suggests advisors looking to justify active allocations will find their strongest case in fixed income, real estate, and emerging markets, and their weakest in US large-cap growth, where the passive case is as compelling as it has ever been.
