Core Insights - Active funds have struggled to outperform index funds over the past year, even during volatile market conditions [1][4] - Only 33% of actively managed mutual funds and ETFs had higher asset-weighted returns than their index counterparts from July 2024 to June 2025, a decline of 14 percentage points from the previous year [2] - Long-term performance shows that only 21% of active strategies outperformed their index counterparts over the past 10 years [4] Performance by Sector - Success rates for active funds vary significantly by sector, with U.S. large-cap stock funds consistently underperforming their index counterparts [5] - Only 14% of actively managed U.S. large-cap funds have beaten the S&P 500 over the past decade [5] - Active managers tend to perform better in less liquid markets, such as fixed income, real estate, and small-cap stocks [6][7] Fee Impact - Fees are a critical factor in the performance disparity between index and active funds, with index funds averaging a 0.11% fee compared to 0.59% for active funds [9] - Higher fees necessitate that active funds achieve greater relative returns to compensate for the fee difference [9] - The impact of fees on long-term earnings is significant; for instance, a 1% fee can result in $29,000 less over 20 years compared to a 0.25% fee [10] Market Behavior - Index funds inherently own all securities in a market index, ensuring they capture both winners and losers, while active managers risk missing out on market rebounds [11] - Active managers often adjust their strategies in response to market events, which can lead to missed opportunities [11]