We recently published the year-end 2017 installment of the Morningstar Active/Passive Barometer report. The report measures the performance of U.S. active managers against their passive peers within their respective Morningstar Categories, uniquely evaluating active managers’ success relative to the actual, net-of-fee performance of competing passive funds rather than an index.
The key findings from the year-end 2017 report were largely in line with what we’ve seen in prior installments. Specifically, we found that actively managed funds have generally underperformed their passive counterparts, especially over longer time horizons, and experienced higher mortality rates.
Compared with the year-end 2016 report, active funds’ trailing one-year success rates improved materially. U.S. stock-pickers’ success rate increased sharply in 2017, as 43% of active managers categorized in one of the nine segments of the U.S. Morningstar Style Box both survived and outperformed their average passive peer. In 2016, just 26% of active managers achieved this feat.