Active and passive

The two scorecard claims were read from S&P Dow Jones Indices on 27 August 2026. The rest of the page was read on 28 August 2026, from the publishers named beside each figure. Two things a reader should know about the state of the citations. The SPIVA Australia Scorecard itself is published as a PDF that this practice cannot open. Its figures were therefore read from S&P's own summary, its own exhibit and its own data tool. For the same reason, the report number for the underperformance table comes from other editions of the same document rather than from the year-end 2025 PDF. The persistence figures were confirmed from the year-end 2025 Persistence Scorecard PDF on 30 August 2026. And the figures from Morningstar and from the two fund managers were added on 28 August 2026. Each now carries the edition it came from, where previously they had none.

The page source carries the classification of each claim, the licensing question this page raises, and what could not be read. Christoph signs off as licensee.

Who this page is for

This page sits inside the professionals section, which you reached past the caution at the top of the tool. One of the two S&P Dow Jones Indices scorecards quoted here states that it is for use with institutions only and not for use with retail investors. The figures taken from it sit behind a question of S&P's own, below, and they are not for showing to a client.

None of it is advice to you or to your clients, and none of it is a view on any fund.

What the record shows

Both S&P Dow Jones Indices scorecards quoted on this page are the year-end 2025 editions, so every figure taken from them is measured as at 31 December 2025.

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

Take the Australian Equity General funds that existed at the start of the ten years to December 2025. Of those, 88% either did not survive the period or survived and returned less than the S&P/ASX 200. Over one year the figure was 74% and over fifteen years 87%. Across all categories, 52% of funds merged or liquidated over the fifteen years. S&P counts a fund that closed inside that percentage, because it was part of the choice available at the start.

S&P publishes the same measure for five categories at five 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 a ranking carried no information at all, about 6% of top quarter funds would still be there two years later. On that footing, about 0.4% would still be there after four years. S&P prints the same 6.25% baseline itself. Over a longer run, take the funds in the top quarter over the five years to December 2020. Of those, 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 year-by-year run points the same way. 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 two year figures and the five year percentages are quoted from the report in Australian trade press of 12 May 2026, and every figure above was confirmed from the year-end 2025 document itself, which this practice opened on 30 August 2026 and read Reports 1, 2 and 5 in full: 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.

Top quarter is a ranking: a fund can rank well in a year it lost money. The funds that started in the top quarter number 70 in Australian Equity General and 75 in Global Equity General. So a handful of funds moves the percentage, and the two year Australian count is statistically not significant. Fund outcomes are not independent either, because funds in one category share style and factor exposures. Their outcomes are therefore what is called correlated. Statistics has proved that correlated outcomes vary more widely than uncorrelated outcomes. Hence what looks like a substantial finding may be more common than a reader would assume. This effect reduces as the number of measured items grows and as the numbers become more diversified. An effect that persists across many fund categories for a long time is more likely correct. It may still not be correct for any individual category or year.

A test on annual calendar windows will not see persistence at shorter horizons or 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 Australian study of the question, 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 reached the other side of it: "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.

What a fund's fee does, and what the calculator does with it

The calculator on this site subtracts the fund, adviser and platform fee from the index return. It shows what each layer costs over every stretch of Australian history that is covered in the data. It charges each layer on the average of the opening balance and the pre-fee closing balance. So the dollars a fee takes out depend on how markets behaved. The engine subtracts the fund fee. It makes no allowance for tracking difference, brokerage the fund itself pays or spreads, which an index fund also incurs.

Source The engine, the fee assumptions it uses and the limits above are set out on the engine at full depth.

Statements that are mentioned in active and passive fund discussions

Two statements about active and passive investing, each set out with its method, the published critiques and the sources for both.

The claim that advice adds about 3% a year, or 5.5%, is treated with the other claims heard in the industry on What is known about the effectiveness of financial advice?, which links back to the two items below for the investor-return gap.

"Investors lag the index by four points a year." The figure comes from DALBAR's Quantitative Analysis of Investor Behavior, known as QAIB, published each year and sold as a report. Each edition sets an average investor return beside an index return over the same window. DALBAR states that it measures monthly fund sales, redemptions and exchanges, which its glossary says the Investment Company Institute provides. It states that it calculates the return as the change in assets once those flows are removed. On that description the average investor is an industry aggregate rather than a sample of accounts. The two sides of that comparison are computed on different bases. A fund's published return is time weighted: it follows one dollar left in place for the whole window, whatever money arrives or leaves. A QAIB investor return is dollar weighted: it weights each year by the money invested in it. A saver contributing monthly has the least money at work in the early years. So where those were the strong years, the dollar weighted figure falls below the fund's own. A second difference opens where a fund is chosen on its record. 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 significant persistence left over "is concentrated in strong underperformance by the worst-return mutual funds". So what his model leaves unexplained is persistence at the bottom rather than the top. Fama and French found the aggregate portfolio of US active equity funds close to the market portfolio. They found "the high costs of active management" showing up "intact as lower returns to investors". Even so, the same paper finds evidence of both superior and inferior performance in the extreme tails, once fund expenses are added back. On that evidence a fund picked on a strong record is expected to return about what active funds on average return. On that evidence, after their costs that is below the index. None of that requires the investor to have mistimed anything. Three published criticisms turn on the first of those two differences. Wade Pfau holds an economics doctorate. He is Professor of Practice at The American College of Financial Services and a principal of the wealth manager McLean Asset Management. He argued in Advisor Perspectives in March 2017 that setting a dollar weighted investor return against a time weighted index return makes the calculation wrong. Harry Sit writes The Finance Buff, publishes no academic work and runs Advice-Only Financial, a paid directory of advisers who charge for advice alone. He worked it through DALBAR's own figures on Kitces.com in October 2012. Over the twenty years to 2011, those figures give 3.49% a year for the average equity fund investor against 7.81% for the S&P 500. That is a gap of 4.32 points. He set them beside DALBAR's own dollar cost averaging benchmark of 3.17%, which the average investor finished above. Michael Edesess holds a mathematics doctorate. He is an adjunct professor at the Hong Kong University of Science and Technology, in environment and sustainability and in finance. He is also chief investment strategist at Compendium Finance. He published a related article in Advisor Perspectives in October 2017. He also wrote The Big Investment Lie in 2007, which argues that the investment industry misleads its clients. DALBAR rejects the criticism, and answered Pfau in the same publication on 8 May 2017. Its reply of 11 October 2017 says QAIB "uses the actual balances in investor accounts each month". It describes the error the critics claimed to have found as "(non-existent)". It lists eleven causes of investors trailing an index. The list begins with non-uniform acquisition and withdrawal dates and includes operating expenses and portfolio trading costs. DALBAR evaluates and certifies financial firms. Its home page carries the line "The nation's top financial institutions choose DALBAR" over the marks of Fidelity, Ameriprise Financial, TIAA, Voya Financial and Morgan Stanley. The full QAIB study sells for US$975. An adviser edition sells for US$250 a year, and one adviser may customise it and give it to clients. A firm may buy the cover white-labelled with its logo, at a price set by the distribution. Advisers who recommend index funds also quote it as evidence that investors damage their own returns. What the record supports is that such a gap exists and can be measured. The figure moves with the window, the index and the fund category. Successive editions give 4.32 points for the twenty years to 2011 and 3.6 for the twenty years to 2015. It does not establish the gap as a measure of investor error. The reason is that dollar weighting and the funds' own costs each move it with no bad decision taken. Buying on a record that does not carry forward moves one investor's own result the same way, without any mistiming. One study has tried to isolate the timing part, on a different gap and a different sample. Fulkerson, Jordan, Riley and Yan put the timing cost in Morningstar's Mind the Gap at 0.10 percentage points a year on Morningstar's own sample. Morningstar itself reports 1.2 points a year. No publication this practice has been able to find separates advised accounts from unadvised ones, so none of them measures the effect of advice. Sources DALBAR's own QAIB page, for what it publishes and that it is sold, its QAIB questions page, for the data sources, the prices and the branding licence, its QAIB glossary, for the calculation, and its home page, for the certification business and the firms named on it; DALBAR's reply of 11 October 2017, for the eleven causes and for its own words on the calculation, read from the EconoTimes syndication of DALBAR's 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.
"The best performing accounts belonged to investors who had died or forgotten them", and "85% of speculators lose money." The first is usually told as a study by a large fund manager, most often Fidelity. In the story, the manager reviewed its own accounts and found the best results in accounts nobody was trading. The reason given is that the owner had died, had forgotten the account existed, or was one of several heirs who could not agree. No such study could be found, and the check published in print reached the same conclusion. John Rekenthaler put the question to Fidelity for a Morningstar column of 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 pieces say the same in passing. One is a Motley Fool piece by Selena Maranjian in February 2025, whose headline states that the study does not exist. The other is a Monevator post of March 2021 that describes the story as apocryphal. Monevator was a link in the chain before it was 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 form that can be located is an anecdote rather than a study. On an episode of Masters in Business on Bloomberg Radio in 2014, James O'Shaughnessy told Barry Ritholtz that Fidelity had studied which of its accounts had done best. He said the answer was the accounts of people who had forgotten they had one. He attributed it to an employee who had recently joined his firm. Business Insider transcribed the exchange on 4 September 2014, and that is the version most later retellings follow. The word "dead" entered as the interviewer's guess in that exchange and the speaker corrected it. The disagreeing heirs appear only in later retellings, and the exchange names no figures, no period and no document. A second strand runs beside it, and it is the one that carries the dates. The same Morningstar column traces a Fidelity "internal performance review of customer performance from 2003 to 2013" in which the best accounts were "either dead or inactive". It traces that review as passed on through a blog, then a speech, then Monevator in June 2015. Work on the same question has 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 them were self-directed accounts with no adviser. The households that traded most earned 11.4% a year after costs, against 17.9% for a value-weighted market index. The average household earned 16.4% and turned over about 75% of its portfolio a year. Before costs the average household earned 18.7%. So these households roughly matched the index and fell below it on the way through. The paper's own finding is 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". A study of turnover measures what trading costs rather than what leaving an account alone earns. The second statement circulates as a round number, and 80%, 85%, 90% and 95% all appear. Published loss rates exist for defined groups of traders, and they differ by group. Over 1992 to 2006, 81.4% of Taiwanese day traders lost money. Over 1998 and 1999, 64.2% of a sample of 324 United States day traders lost money. And 97% of Brazilian futures day traders who persisted at least 300 days lost money. No primary source establishes a single figure for speculators as a whole. The round numbers in circulation are not tied to any of these populations. The attribution offered most often is to Thomas Hieronymus's work on futures accounts in the 1960s. It can be checked further than the page previously said. The book is obtainable, and no retelling gives a page reference. The figure usually credited to it appears in a magazine essay of 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 beside a separate quotation from Hieronymus. Figures in that range do exist, but only in a specific area: regulators counting retail accounts in one leveraged product. The United Kingdom's Financial Conduct Authority reported in December 2016 that 82% of clients lost money in a representative sample of client accounts at contracts for difference firms. It named no measurement period. In announcing its 2018 product intervention, the European Securities and Markets Authority said that 74% to 89% of retail accounts typically lose money across national analyses. It gave average losses per client of 1,600 to 29,000 euros. ASIC reported that 68% of retail contracts for difference clients lost money in the 2024 financial year. It put their losses at more than 458 million dollars in total, including 73 million dollars of fees. It also reported that 70% of wholesale clients lost money, with net losses of 738 million dollars. Those three are what is known about one leveraged product sold in three markets over different 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 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 the average dollar in a fund earned with the return of the same fund. It does so for United States mutual funds and exchange traded funds. The fund's published return is a time weighted return on a dollar left in place for the whole period. The average dollar actually invested earned a different rate, usually lower. The 2026 edition puts the gap at about 1.2 percentage points a year over the ten years to December 2025. In it, the average dollar earned 8.7% a year against these funds' 9.9% aggregate annual total return. Morningstar's own series for the ten year periods ending in December 2021 to 2025 runs 1.7, 1.7, 1.1, 1.2 and 1.2 percentage points. A paper in the Financial Analysts Journal of May 2026 re-examined the same sample. It put the part of the gap attributable to poor timing at 0.10 percentage points a year. So the size of the behavioural component is in dispute in the peer-reviewed literature.

Morningstar's Australian figure is much smaller: 0.40 percentage points a year over the five years to June 2023, measured on 869 Australian funds. Part of the gap comes from the timing of money going in and out rather than from investor decisions. In the current edition the narrowest gaps by category are United States stock funds at 0.4 points and allocation funds at 0.7. The widest in that edition are alternative funds at 1.6 and sector equity at 1.2. Morningstar itself offers a reading of why the Australian and United Kingdom gaps are the smallest in its regional study. Its reading is that "these markets are characterized by more holistic financial advice than the other markets included in the study". That is an interpretation of its own figures rather than a measurement.

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.