Active fund managers posted their best short-term showing in years, but the latest Morningstar data underscores a stubborn reality: over the long haul, most still lag passive rivals. The mid-2026 Active/Passive Barometer, released Tuesday, found that just over 40% of active funds survived and outperformed their passive benchmarks in the 12 months through June 30, 2026—a 7-percentage-point improvement from the prior year. Yet over a 10-year horizon, only 25% of active strategies managed to beat passive peers.
The study, authored by Bryan Armour, CFA, director of passive strategies research at Morningstar, along with analysts Brendan McCann and Brian Paoli, examined 9,226 unique mutual funds and ETFs representing roughly $29 trillion in assets—about 67% of the U.S. fund market. The findings offer a nuanced picture for advisors weighing active versus passive allocations: short-term gains are real, but sustained outperformance remains elusive.
Large-cap growth: the toughest battleground
U.S. large-cap growth proved the most hostile environment for active stock-pickers. Over 10 years, just 5% of active large-growth funds survived and beat their passive benchmark—the lowest success rate of any category. Of the active large-growth funds that existed two decades ago, 66% have closed, and fewer than 1% outperformed over that span. Large-cap blend (10.5%) and large-cap value (25.5%) fared better but still fell short of what most advisors would consider acceptable odds.
One-year results in large-cap were mixed. Large-cap success rates fell to 27%, down 5 percentage points year-over-year. Large-value dropped sharply from 47% to 32%, while large-growth slipped from 28% to 17%. Only large-blend improved, rising from 24% to 32%.
Mid- and small-cap shine in the short term
Active mid-cap funds posted a 47% one-year success rate, up 19 percentage points from the prior year. Small-cap strategies did even better, with 49% clearing the bar—an 18-point improvement. Small-value led the small-cap pack with a 64% one-year success rate, up sharply from 32% the year before. Over 10 years, mid-value (34.7%) and small-growth (34.5%) were the strongest U.S. equity categories, though still discouraging in absolute terms.
Fixed income: the most consistent active hunting ground
Fixed income continued to outshine equities as a space where active managers reliably add value. Over the 10-year period, 45% of active bond funds survived and outperformed passive peers—the highest rate of any broad asset class. One-year results improved dramatically: active bond funds posted a 52% success rate for the year ending June 2026, up 22 percentage points. Intermediate core bond funds led with a 66% success rate, while corporate bond funds surged from just 4% to 34%.
Diversified emerging markets funds recorded a 70% one-year success rate, a 35-percentage-point spike from the prior year—the largest single-year jump across all equity categories. Over 10 years, emerging markets active funds succeeded at a 37% rate, the best of any international equity category. Active global real estate funds recorded the highest one-year success rate of any category studied: 73.7%, up from just 15% a year earlier. U.S. real estate active funds also improved, reaching 53% for the year.
Fees: the clearest predictor of success
Across all categories and time frames, the data points to one variable with consistent predictive power: fees. Active funds in the cheapest cost quintile beat passive peers at a 33% rate over 10 years—versus only 20% for funds in the most expensive quintile. That 13-percentage-point gap held across asset classes. In U.S. large-blend, the cheapest funds succeeded 23% of the time over 10 years, compared with 9% for the priciest. The spread was equally stark in emerging markets: 52% for the cheapest quintile against 27% for the most expensive.
The cost finding aligns with a broader pattern highlighted by the report's asset-weighted return analysis. Investors have, on balance, directed capital toward better-performing active funds: in 16 of 20 categories studied, the average dollar invested in active funds outperformed the average active fund on an equal-weighted basis. "Investors have chosen active funds wisely," the report concluded, "implying investors favor cheaper, higher-quality strategies."
The mid-2026 barometer offers a nuanced picture rather than a simple verdict. Active management is not uniformly failing; it is category-dependent, cost-sensitive, and appears to be gaining traction in an environment where market dispersion is creating more room for skilled managers to differentiate. For advisors, the takeaway is clear: when selecting active funds, cost and category matter—and the long-term odds remain steep. As the shift toward active ETFs continues, these findings may inform how advisors structure portfolios. Meanwhile, institutional plans have posted strong quarters, but the active-passive debate shows no signs of settling.
