Fifty-seven percent of actively managed funds beat their average passive peers over the 12-month period through June 2023, their highest success rate in years.

The Morningstar Active/Passive Barometer compares this recent outperformance to active funds’ 43% success rate in calendar-year 2022. Over the past 12 months, more active funds beat the average passive strategy in small-cap, mid-cap and large-cap stock categories, and active real estate strategies doubled to 67% compared to calendar-year 2022.

However, the recent jump left active funds’ long-term record against their passive competitors relatively unchanged. One out of every four active strategies survived and passed their average passive peer over the last 10 years ending June 2023. In general, long-term success rates were higher in foreign stock, real estate and bond fund categories, and long-term success rates were lowest within U.S. large-cap active strategies. The average dollar invested in active funds over the past 10 years has beaten the average active fund in 19 of the 20 categories measured, suggesting that investors favor cheaper, higher-quality strategies.

The barometer measures performance drivers of U.S. active funds against a composite of passive peers in their respective Morningstar categories. It examines nearly 8,212 unique funds that total approximately $17 trillion in assets, about 56% of the U.S. fund market. The barometer measures active funds’ success in several different ways: after-fee performance against passive funds; asset-weighted average performance of all the fund’s share classes; how the average dollar invested in active funds has done compared to passive funds; patterns in active fund success by fee level; and the distribution of thriving active funds’ excess returns against their average passive peer.

Source: Morningstar’s U.S. Active/Passive Barometer, Midyear 2023.

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