Actively managed mutual funds and ETFs fared slightly better passive fund peers from July 2023 to June 2024, according to Morningstar's most recent semiannual US Active/Passive Barometer. Outperformance was strongest among active bond managers.
Morningstar found that over the 12 months ending in June, 51% of active mutual funds and ETF strategies outperformed the average of passive funds in their Morningstar category, which the firm's researchers called “basically a coin flip.” Over 10 years ending in June, actively managed funds fared even worsewith only 29% of them surviving and outperforming their indexed peers.
However, when it came to active bond funds, two out of three outperformed their average passive counterparts over the year ending in June, including a 72% success rate among core bond intermediate funds. Morningstar credited the shorter duration of these bond portfolios and a greater appetite for credit risk in an environment of higher interest rates and tighter credit spreads.
Actively managed real estate funds it also did well, with a 66% success rate over the past year.
Active funds focused on large-cap and small-cap stocks performed in line with the average, with a success rate of 53% and 52%, respectively. However, active funds focused on mid-cap stocks were successful only 36% of the time.
Regardless, Morningstar found it investors do an excellent job of selecting well-performing active funds. Over the past decade, the average dollar invested in actively managed funds outperformed the average dollar invested in passive funds in 19 of the 20 categories it examined.
The Morningstar US Active/Passive Barometer looks at approximately 8,326 funds with $21 trillion in assets. These funds represented 72% of the US fund market in mid-2024. The barometer evaluates active funds against a pool of passive funds.