Active and passive

What the record shows

Both S&P Dow Jones Indices scorecards quoted on this page are the year-end 2025 editions.

S&P publishes the SPIVA Scorecard for institutional and professional use. Are you an investment professional?

Most Australian Equity General funds trailed the S&P/ASX 200

Consider the Australian Equity General funds that existed at the start of the ten-year period ending in December 2025. Of these, 88% either did not survive the period or, while surviving, achieved a return that was lower than that of the S&P/ASX 200. Over a one-year period, this figure stood at 74%, and over fifteen years at 87%. Across all categories, 52% of the funds merged or were wound up over the course of the fifteen years. S&P includes a fund that was closed within this percentage, as it was part of the range at the outset.

S&P publishes the same metric for five categories across five time horizons. These are the percentages for the year-end 2025 edition.

Category	1 year	3 years	5 years	10 years	15 years
Global Equity General	70%	82%	89%	95%	96%
Australian Equity General	74%	80%	80%	88%	87%
Australian Equity Mid- and Small-Cap	64%	52%	60%	80%	60%
Australian Equity A-REIT	40%	78%	79%	75%	88%
Australian Bonds	27%	34%	49%	62%	77%

Source SPIVA Australia Scorecard, year-end 2025 edition, S&P Dow Jones Indices, published March 2026, Report 1a, which reports the percentage of funds underperforming their benchmarks on absolute return. The table is S&P's own Exhibit 1 for this edition, which rounds to whole numbers. The three Australian Equity General values also come from S&P's own SPIVA data tool, which gives them to two decimals for Australian Equity General against the S&P/ASX 200, in Australian dollars, on absolute return: 73.61% over one year, 87.64% over ten and 86.94% over fifteen. S&P's own prose for this edition, quoted in Australian trade press of 18 March 2026, gives "The underperformance rate was 74%", "Over 15 years, 87% of funds failed to beat the benchmark" and "52% of funds across all categories merged or liquidated over the 15-year period". S&P Dow Jones Indices states that it "does not sponsor, endorse, sell, promote or manage any investment fund". It also earns most of its index revenue from the products that track its indices: S&P Global's Form 10-K for 2025 puts asset-linked fees, which it describes as revenue earned "when investors direct funds into its proprietary designed or owned indexes", at US$1,206 million of the Indices segment's US$1,850 million. © 2026 S&P Dow Jones Indices.

The percentage counts funds rather than money. S&P publishes an asset-weighted average separately, and it can point the other way. In 2025 Australian listed property funds returned 11.7% on an asset-weighted average basis, against their index's 9.2%, while 40% of them trailed it. Fund returns are measured after fees against an index that carries no costs. S&P's methodology says so: "There has been no deduction from index returns to account for fund investment expenses". It also says the fund returns used are "net of fees, excluding loads". S&P changed the Global Equity General category's benchmark in 2024 to the S&P World Index, which launched in May 2020. Most of the ten and fifteen year history behind that row is therefore back-tested index return. S&P warns that such returns "may differ significantly from, and be lower than" actual returns.

A published critique of the scorecard's method exists. Cremers, Fulkerson and Riley, in a draft of 4 May 2026, argue that three choices understate active performance. The first is counting a fund that exited as an underperformer "regardless of its actual performance prior to exit". The second is weighting every fund equally when most money sits in a few large ones. The third is comparing against a benchmark rather than against an investable passive fund. On their revised basis 56% of the assets in active US equity funds underperformed in 2024. The critique addresses the US scorecard rather than this one. The Investment Adviser Association's Active Managers Council, the active industry's own body, supported the research. Robin Wigglesworth, a Financial Times editor, strongly defends the SPIVA Scorecard by pointing out the critics' weaknesses in their arguments.

Being ahead rarely lasted

In the twelve months to December 2023, 70 Australian Equity General funds were in the top quarter of their peer group. Of those, five, or 7.1%, were still in the top quarter in both of the next two years. Of the 75 Global Equity General funds in the top quarter in the same twelve months, 12, or 16.0%, were. If rankings were purely random, about 6% of top quarter funds would still be there two years later and 0.4% would still be there after four years.

For the funds in the top quarter over the five years to December 2020, 22.4% were still in the top quarter over the following five years. Another 46.6% fell to the bottom quarter or were merged or liquidated. Australian bond funds were the exception, with more of them staying in the top quarter than falling to the bottom or closing. The same applies to a year-by-year comparison. At December 2021, 218 funds were in the top quarter of their category. Of these, five were still there at every yearly check to December 2025. All five are bond funds: 5 of the 17 that started, or 29.4%. In every equity category the December 2025 figure is zero.

Source Australia Persistence Scorecard, year-end 2025 edition, S&P Dow Jones Indices, published 11 May 2026. Report 1 carries the two year runs; Report 5, the five-year transition matrix based on quartiles, carries the five year figures; and Report 2, the five consecutive 12-month periods, carries the year-by-year run. The five year percentages are the totals across the five reported categories, 39 of 174 top-quarter funds staying and 81 falling to the bottom or closing, and each report row resolves to whole funds. S&P's own term for a top quarter is a quartile. The chance baseline is S&P's own: its Australian commentary on the year-end 2023 edition reads "only 2% remained in the top quartile for each of the next two years (versus a 6.25% expectation under random distribution)". S&P Dow Jones Indices states in the same commentary that it "does not sponsor, endorse, sell, promote or manage any investment fund", and it earns most of its index revenue from fees on the assets tracking its indices. © 2026 S&P Dow Jones Indices.

The two year Australian count is statistically not significant.

A test based on annual calendar windows will not reveal persistence over shorter horizons, or persistence conditioned on what a fund holds. Bollen and Busse found "superior performance is a short-lived phenomenon that is observable only when funds are evaluated several times a year". Cremers and Petajisto found that "funds with the highest Active Share significantly outperform their benchmarks, both before and after expenses, and they exhibit strong performance persistence". The equivalent Australian study, by Bennett, Gallagher, Harman, Warren and Xi, found "significant persistence among outperforming rather than underperforming funds", fading beyond six months. On Berk and Green's account, "the lack of persistence in active manager returns does not imply that differential ability across managers is nonexistent or unrewarded". The reason they give is that money flows to skill until the return to it is competed away. So on their account no persistence is what a competitive market produces, even where skill is real.

The review of the research ASIC commissioned stated: "Good past performance seems to be, at best, a weak and unreliable predictor of future good performance over the medium to long term ... Where persistence was found, this was more frequently in the shorter-term". A test that finds no persistence hasn't established that skill is absent. It has established that there is no evidence that persistent skill shows up more than on rare occasions over this length of time. That makes it less likely to find one of the possible, rare exceptions ahead of time. The reason is that investing with those that have the best track record is not a strategy that has led to outperformance.

Bollen and Busse, "Short-Term Persistence in Mutual Fund Performance", Review of Financial Studies, 2005; Cremers and Petajisto, "How Active Is Your Fund Manager? A New Measure That Predicts Performance", Review of Financial Studies, 2009; Bennett, Gallagher, Harman, Warren and Xi, "A new perspective on performance persistence: evidence using portfolio holdings", Accounting and Finance, 2018, quoted from the published abstract; Berk and Green, "Mutual Fund Flows and Performance in Rational Markets", 2002 working paper of the 2004 Journal of Political Economy article, quoted from the abstract; and "A review of the research on the past performance of managed funds", ASIC Report 22, prepared for ASIC by the Funds Management Research Centre, September 2002, revised June 2003.

How fund fees are processed

The calculator on this website deducts fund, adviser and platform fees from the index return. It shows how much each fee costs over every period in Australian history covered by the data. The calculation for each fee is based on the average of the opening balance and the closing balance before fees are deducted. The amount deducted by the fees therefore depends on how the markets have performed. The calculator deducts the fund fee. It takes into account neither tracking difference nor the brokerage fees or spreads paid by the fund itself, which are also incurred by an index fund.

Source The calculation tool, the fee assumptions it uses and the above-mentioned limitations are set out on the engine at full depth.

Statements mentioned in discussions about active and passive funds

Two statements on active and passive investing, each accompanied by a description of the respective method, the published criticisms and the sources for both.

The claim that financial advice yields around 3% a year, or 5.5%, is addressed, alongside other claims made within the industry, under What is known about the effectiveness of financial advice?, with reference to the following two points regarding the investor-return gap.

"Investors lag the index by four points a year." This figure is taken from DALBAR's Quantitative Analysis of Investor Behavior, known as QAIB, which is published annually and sold as a report. Each edition compares the average investor return with the index return over the same period. DALBAR states that it measures monthly fund sales, redemptions and switches, which, according to its glossary, are provided by the Investment Company Institute. It states that the return is calculated as the change in assets once these capital flows have been factored out. According to this description, the average investor represents an industry aggregate rather than a sample of individual accounts. The two sides of this comparison are calculated on different bases. A fund's published return is time-weighted: it assumes that one dollar remains in the fund throughout the entire period, regardless of how much money flows in or out. The QAIB investor return is dollar-weighted: it weights each year according to the amount of money invested in it. A saver who makes monthly contributions has the least capital in the fund during the early years. So if these were the strong years, the dollar-weighted figure falls below that of the fund itself. A second difference arises when a fund is selected on the basis of its past performance. In the United States, Carhart examined US equity funds without survivor bias. He found that "common factors in stock returns and investment expenses almost completely explain persistence in equity mutual funds' mean and risk-adjusted returns". He also found that the only remaining significant persistence "is concentrated in strong underperformance by the worst-return mutual funds". What his model therefore leaves unexplained is persistence at the lower end, rather than at the upper end. Fama and French found that the aggregate portfolio of active US equity funds is close to the market portfolio. They noted that "the high costs of active management" show up "intact as lower returns to investors". Nevertheless, the same study finds evidence of both above-average and below-average performance at the extreme ends of the spectrum, once fund costs are factored back in. Based on these findings, it is to be expected that a fund selected on the basis of a strong track record will achieve roughly the same return as active funds do on average. After deducting its costs, this return is therefore lower than that of the index. None of this presupposes that the investor has missed the right timing. Three published criticisms relate to the first of these two differences. Wade Pfau holds a PhD in economics. He is Professor of Practice at The American College of Financial Services and a principal of the wealth manager McLean Asset Management. In March 2017, he argued in Advisor Perspectives that comparing a dollar-weighted investor return with a time-weighted index return leads to an incorrect calculation. Harry Sit is the author of The Finance Buff, does not publish academic papers and runs Advice-Only Financial, a paid directory of advisers who charge fees exclusively for their advice. He worked through DALBAR's own figures on Kitces.com in October 2012. Over the twenty-year period up to 2011, these figures showed an annual return of 3.49% for the average equity fund investor, compared with 7.81% for the S&P 500. This corresponds to a difference of 4.32 percentage points. He compared these figures with the benchmark of 3.17% set by DALBAR itself for the dollar-cost averaging approach, which the average investor outperformed. Michael Edesess holds a PhD in mathematics. He is an adjunct professor at the Hong Kong University of Science and Technology in the fields of environment and sustainability as well as finance. He is also chief investment strategist at Compendium Finance. In October 2017, he published an article on this subject in Advisor Perspectives. In 2007, he also authored the book The Big Investment Lie, in which he argues that the investment industry misleads its clients. DALBAR rejects the criticism and responded to Pfau on 8 May 2017 in the same publication. In its reply dated 11 October 2017, it states that the QAIB "uses the actual balances in investor accounts each month". The error allegedly identified by the critics is described therein as "(non-existent)". Eleven reasons are listed as to why investors underperform an index. The list begins with non-uniform acquisition and withdrawal dates and includes operating costs as well as portfolio trading costs. DALBAR assesses and certifies financial firms. On its homepage, above the logos of Fidelity, Ameriprise Financial, TIAA, Voya Financial and Morgan Stanley, the phrase "The nation's top financial institutions choose DALBAR" appears. The full QAIB study costs US$975. An adviser's edition costs US$250 a year, and one adviser may customise it and pass it on to clients. A firm can buy the cover white-labelled with its own logo, at a price that depends on how widely it is distributed. Advisers who recommend index funds also cite this as evidence that investors are eroding their own returns. The data shows that such a gap exists and can be measured. The figure varies depending on the time period, index and fund category. Successive editions report 4.32 points for the twenty years to 2011 and 3.6 points for the twenty years to 2015. However, this does not prove that the gap is a measure of investor error. The reason for this is that both the dollar weighting and the funds' own costs influence the figure without any incorrect decision having been made. Buying on a record that does not carry forward shifts an investor's own return in the same way, without any mistiming. One study attempted to isolate the timing aspect using a different gap and a different sample. Fulkerson, Jordan, Riley and Yan estimated the timing costs in Morningstar's Mind the Gap at 0.10 percentage points a year, based on Morningstar's own sample. Morningstar itself quotes 1.2 points a year. No publication this practice has been able to find separates advised from non-advised accounts, so none of them measures the effect of advice. Sources DALBAR's own QAIB page for the published content and sales, the QAIB FAQ page for data sources, pricing and brand licensing, the QAIB glossary for the calculation, and the homepage for the certification business and the companies listed there; DALBAR's response dated 11 October 2017, regarding the eleven reasons and its own statements on the calculation, taken from the EconoTimes syndication of the DALBAR press release. Wade Pfau, Advisor Perspectives, 6 March 2017, where he also writes a monthly column, his faculty page at The American College of Financial Services, for the title, and his bio at McLean Asset Management, for the firm; Harry Sit, "Does The DALBAR Study Grossly Overstate The Behavior Gap?", Kitces.com, 3 October 2012, for the 1992 to 2011 figures, with NerdWallet for his own advice-only service, because his own pages refuse an automated read; the venue's contributor page states that it does not permit sales pitches, sponsored posts or videos. Michael Edesess, Advisor Perspectives, 9 October 2017, and his faculty page, read 28 August 2026, for the university posts and the Compendium Finance role; and Norm Rothery, MoneySense, 31 March 2017, for the twenty years to 2015 and for the summary of Pfau's argument, who holds a physics doctorate and publishes a value stock newsletter. For the evidence: Mark Carhart, "On Persistence in Mutual Fund Performance", Journal of Finance, 1997, and Eugene Fama and Kenneth French, "Luck versus Skill in the Cross-Section of Mutual Fund Returns", Journal of Finance, 2010, both quoted from the published abstracts; Jon Fulkerson, Bradford Jordan, Timothy Riley and Qing Yan, "Bad Timing Does Not Cost Investors 15% of Their Funds' Returns: An Examination of Morningstar's 'Mind the Gap' Study", Financial Analysts Journal, 12 May 2026; and Index Fund Advisors, for one such use. The two Advisor Perspectives addresses refused an automated read again on 28 August 2026, so Pfau's argument is given as Rothery's summary reports it, the Edesess article is named without its argument, and DALBAR's reply to Pfau of 8 May 2017 is named without a link for the same reason. That no publication separating advised from non-advised accounts was found is this practice's own search, of 28 August 2026.
"The best performing accounts belonged to investors who had died or forgotten them", and "85% of speculators lose money." The first is usually presented as a study by a major fund manager, most often Fidelity. In this account, the fund manager reviewed its own accounts and found that the best results were achieved by accounts that nobody was trading in. The reasons given were that the account holder had died, had forgotten the account existed, or had been one of several heirs who could not reach an agreement. No such study could be found, and the review published in print reached the same conclusion. John Rekenthaler put the question to Fidelity in a Morningstar column dated 6 October 2015: "My Fidelity contact has not heard of such a thing, nor has Morningstar's Fidelity Canada contact. Suffice it to say that none of these citations came linked to the original source." Two later articles say the same in passing. One is an article by Selena Maranjian on Motley Fool from February 2025, whose headline states that the study does not exist. The other is a post on Monevator from March 2021, which describes the story as apocryphal. Monevator was initially part of the chain of reports before becoming a sceptic. The same column records that in June 2015 Monevator wrote that Fidelity had "released a study" to that effect, which is what took the story from something a blog reported to something said to be published. The earliest version that can be traced is more of an anecdote than a study. In an episode of Masters in Business on Bloomberg Radio in 2014, James O'Shaughnessy told Barry Ritholtz that Fidelity had investigated which of its accounts had performed best. He said the answer was the accounts of people who had forgotten they even had one. He attributed this to an employee who had only recently joined his firm. Business Insider transcribed this exchange on 4 September 2014, and this is the version to which most subsequent retellings adhere. The word "dead" appeared in this conversation as a conjecture by the interviewer and was corrected by the speaker. The disagreeing heirs only appear in later retellings, and the conversation mentions neither figures nor a time period nor a document. There is a second strand running alongside this, and it is the one that carries the dates. The same Morningstar article refers to an "internal performance review of customer performance from 2003 to 2013" at Fidelity, in which the top-performing accounts were "either dead or inactive". It traces how this review was disseminated via a blog, then a speech, and finally via Monevator in June 2015. Studies on the same topic have already been published. Barber and Odean, in the Journal of Finance in 2000, examined 66,465 households at one discount broker between 1991 and 1996. All of these were self-directed accounts without an adviser. The households that traded most frequently achieved an annual return of 11.4% after costs, compared with 17.9% for a market-cap-weighted index. The average household achieved 16.4% and turned over approximately 75% of its portfolio each year. Before costs were deducted, the average household achieved 18.7%. These households therefore roughly matched the index before costs and fell below it after costs. The study itself concludes that "it is the cost of trading and the frequency of trading, not portfolio selections, that explain the poor investment performance of households during our sample period". An analysis of turnover rate measures trading costs rather than the return that would be achieved if an account were left untouched. The second statement is often cited as a round figure, with 80%, 85%, 90% and 95% being mentioned. Published loss rates are available for certain groups of traders, and they vary by group. Between 1992 and 2006, 81.4% of Taiwanese day traders lost money. In 1998 and 1999, 64.2% of a sample of 324 US day traders lost money. And 97% of Brazilian futures day traders who were active for at least 300 days lost money. There is no primary source that provides a single figure for speculators as a whole. The round figures in circulation cannot be attributed to any of these groups. Thomas Hieronymus's work on futures accounts from the 1960s is most frequently cited as the source. It can be checked further than the page previously said. The book is available, and none of the retellings contain a page reference. The figure usually attributed to this work appears in a magazine article dated 22 September 1967 as an unattributed survey statistic: "Another survey, this one of 418,000 commodities transactions, turned up the fact that 75% ended in losses". It is printed alongside a separate quotation from Hieronymus. Figures of this magnitude do exist, but only in a specific context: among regulatory authorities that record retail client accounts for a particular leveraged product. The UK Financial Conduct Authority (FCA) reported in December 2016 that 82% of clients in a representative sample of client accounts with contracts for difference (CFD) providers had lost money. It named no measurement period. When announcing its 2018 product intervention, the European Securities and Markets Authority (ESMA) stated that 74% to 89% of retail client accounts typically lose money in national analyses. It cited average losses per client of between 1,600 and 29,000 euros. ASIC reported that 68% of retail clients trading contracts for difference had lost money in the 2024 financial year. It put their total losses at more than $458 million, including $73 million in fees. It also reported that 70% of wholesale clients had lost money, with net losses of $738 million. These are the known facts regarding a leveraged product that was sold in three markets over different time periods. Sources Business Insider, 4 September 2014, for the radio exchange; John Rekenthaler, "In Praise of the Dead (Investors)", Morningstar, 6 October 2015, read from the syndicated copy because Morningstar's own archive could not be opened, for the check with Fidelity and for the second strand; The Motley Fool, 3 February 2025 and Monevator, 25 March 2021, each for its own passing conclusion that no such study exists; Barber and Odean, "Trading Is Hazardous to Your Wealth", Journal of Finance, 2000. For the loss rates: Barber, Lee, Liu and Odean, "The Cross-Section of Speculator Skill: Evidence from Day Trading", Journal of Financial Markets, 2014, whose figure is "81.4% of day traders in this sample lose money unconditionally"; Jordan and Diltz, "The Profitability of Day Traders", Financial Analysts Journal, 2003, where "208 traders (64.2 percent) had a net profit less than zero after commissions"; and Chague, De-Losso and Giovannetti, "Day trading for a living?", 2020 working paper. The last two are quoted from their published abstracts, because Taylor and Francis and SSRN both refuse an automated read. Thomas Hieronymus, Economics of Futures Trading, borrowable at the Internet Archive; the survey statistic from Time, 22 September 1967, whose archive refuses an automated read and which was read with a browser on 28 August 2026. FCA, 6 December 2016; ESMA, 27 March 2018; and ASIC media release 26-004MR with ASIC Report 828, "Risky business: Driving change in CFD issuers' distribution practices", 20 January 2026, which gives the figures to two decimals: 133,674 retail clients, 68.42%, $458.01 million of net losses and $73.29 million of fees. That no such Fidelity study was found is this practice's own search, of 17 August 2026. That no primary source establishes one figure for speculators as a whole is this practice's own search, of 17 August 2026 and again on 28 August 2026, and not a published finding.

Morningstar's "Mind the Gap"

Morningstar's "Mind the Gap" compares the return achieved by an average dollar invested in a fund with the return of that same fund. This is done for US mutual funds and exchange-traded funds (ETFs). The published return of the fund is a time-weighted return on a dollar that remained invested throughout the entire period. The average dollar actually invested achieved a different return, which was generally lower. The 2026 edition puts the difference for the ten-year period up to December 2025 at around 1.2 percentage points a year. During this period, the average dollar generated a return of 8.7% a year, while the aggregate annual total return for these funds stood at 9.9%. Morningstar's own series for the ten-year periods ending in December 2021 to 2025, respectively, shows figures of 1.7, 1.7, 1.1, 1.2 and 1.2 percentage points. An article in the Financial Analysts Journal from May 2026 re-examined the same sample. It estimated the portion of the difference attributable to poor timing at 0.10 percentage points a year. The magnitude of the behaviour-related component is therefore a matter of debate in the peer-reviewed literature.

The figure quoted by Morningstar for Australia is much lower: 0.40 percentage points a year over the five-year period to June 2023, based on 869 Australian funds. Part of the difference comes from the timing of inflows and outflows rather than from investors' decisions. In the current issue, US equity funds, at 0.4 points, and allocation funds, at 0.7 points, show the smallest gaps by category. The largest gaps in this issue are recorded by alternative funds, at 1.6, and sector equity funds, at 1.2. Morningstar itself provides an explanation in its regional study as to why the gaps are smallest in Australia and the UK. The explanation is that "these markets are characterized by more holistic financial advice than the other markets included in the study".

Source Morningstar, "Mind the Gap 2026", published 6 August 2026, measured to 31 December 2025, for the United States figures and the series; and "Mind the Gap 2023: Investor Returns Around the World", 4 October 2023, measured to 30 June 2023, for the Australian figure. The re-examination is Jon Fulkerson, Bradford Jordan, Timothy Riley and Qing Yan, "Bad Timing Does Not Cost Investors 15% of Their Funds' Returns: An Examination of Morningstar's 'Mind the Gap' Study", Financial Analysts Journal, 12 May 2026, which is the same paper the second statement above cites. Morningstar sells products in the market it measures: its 2025 annual report states that it licenses its own indices "to numerous institutions to use as the basis for ETFs, mutual funds, derivatives and separately managed accounts" and that it had about US$378.0 billion of assets under management and advisement at 31 December 2025.

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Designed and produced by Dr Christoph Schnelle, In Your Interest Financial Planning. In Your Interest Financial Planning Pty Ltd, ABN 28 094 300 464 is Authorised Rep. No 308161 of Fiduciary Duty Advisers Pty Ltd AFSL No 527434. Nothing on this page is advice to you or to your clients, and nothing on it is a recommendation of any fund or any strategy. Corrections are welcome and wanted – contact us.