Research challenges long-held assumptions about active fund underperformance
A new academic study is challenging one of the investment industry's most widely cited scorecards, arguing that the SPIVA US Scorecard paints an overly pessimistic picture of active fund management and may fail to reflect how investors actually experience fund performance.
The report, titled “How the SPIVA US Scorecard Understates the Performance of Actively Managed Mutual Funds,” was conducted by professors K. J. Martijn Cremers of the University of Notre Dame, Jon Fulkerson of the University of Dayton, and Timothy B. Riley of the University of Arkansas.
The research was supported by the Investment Adviser Association’s Active Managers Council.
Karen Barr, president and CEO of the Investment Adviser Association, said the findings reinforce longstanding concerns within the industry over how active-versus-passive comparisons are framed.
“The Active Managers Council has long maintained that the active-passive scorecards are overly negative on active management,” Barr said. “We are pleased that this study not only details the scorecards’ methodology issues but also provides a more realistic view of active management’s aggregate performance.”
The findings arrive as advisors continue pouring assets into active ETFs. InvestmentNews previously reported that active ETF assets in RIA portfolios climbed from $27.7 billion in early 2021 to nearly $400 billion by the end of 2025, highlighting sustained demand for active strategies despite years of industry messaging favoring passive investing.
Reframing the SPIVA debate
SPIVA, which stands for S&P Indices Versus Active, has long been used to argue that most active managers underperform benchmark indexes over time.
But the authors of the new study contend the scorecard’s methodology creates structural biases against active management.
“Broadly speaking, the SPIVA US Scorecard is too negative on the value of active management. Staying with the Scorecard’s framework, we identify substantially more value after modifying key empirical choices to better align with the actual mutual fund investor experience,” said co-author Tim Riley.
The researchers argue SPIVA effectively measures fund survival rather than investor outcomes because funds that close or merge are automatically classified as failures regardless of how they performed before liquidation.
The paper also criticizes SPIVA for equally weighting all funds instead of weighting them by assets under management, a distinction the researchers say better reflects where investors actually allocate capital.
Under the study’s adjusted framework, the performance gap between active and passive strategies narrowed considerably and, in several categories, reversed entirely.
Asset-weighted performance tells a different story
One of the study’s central findings is that investor dollars often performed substantially better than fund-level averages suggest.
The authors found that larger active funds tended to outperform smaller peers, meaning asset-weighted results were consistently stronger than equal-weighted results across many categories.
That finding could reinforce the role advisors play in manager selection and due diligence, particularly as RIAs increasingly use active ETFs alongside traditional active mutual funds.
The paper suggests investors may already be voting against the traditional SPIVA narrative through their asset allocation decisions, with capital increasingly concentrated in stronger-performing active strategies.
Fixed income stands out
The study found some of the strongest evidence supporting active management in fixed income markets.
According to the researchers, active bond managers outperformed passive counterparts over both shorter and longer time horizons, contradicting conclusions typically reported by SPIVA.
In one example highlighted in the paper, 86% of assets in high-yield bond funds outperformed over the five years through 2024, compared with SPIVA’s finding that only 46% of funds in the category beat their benchmark.
The findings may resonate with advisors who have long argued that bond markets are less efficient than equities and therefore offer greater opportunities for active managers to add value through security selection, duration management, and credit analysis.
