Index investing in equities has gained popularity in recent years, largely due to its low costs and the removal of emotional decision-making. However, a key question remains: how do active fund managers actually perform compared to the market? A widely used source to examine this is the SPIVA report (S&P Index Versus Active), which annually compares the performance of actively managed funds with relevant market indices. The figures in the SPIVA report show that active fund managers almost never add value compared to index investing and that index investing is virtually impossible to beat.
Large number of funds disappear
The 2025 edition of the SPIVA report focuses on U.S. equity funds and analyses a total of 2,447 funds over a 20-year period. The data shows that 1,553 funds disappeared during this period, due to closures or strategy changes. As a result, only 894 funds – less than 37% – remained in existence over the full 20 years. The report highlights that focusing only on surviving funds leads to misleading conclusions due to “survivorship bias,” where poorly performing funds drop out of the dataset, making the remaining group appear stronger than the overall population.
Majority underperform the index
The findings show a consistent pattern of underperformance. After three years more than 88% of funds lag behind their benchmark index. After five years this rises to 93%, after ten years to 96%, and after twenty years to more than 97%. According to the report this suggests that virtually all actively managed equity funds underperform their benchmark over the long term.
Returns and cost differences
Part of the difference can be explained by costs as funds incur management and transaction fees while indices do not. However, this accounts for only a small portion of the gap. On average, the funds analysed delivered an annual return of 8.29% over the past 20 years, compared to 10.88% for the benchmark index – a difference of approximately 2.6 percentage points per year. Even after subtracting around 0.20% in ETF costs a substantial gap remains. Based on these figures, an initial investment of $100,000 in 2006 would have grown to approximately $491,000 with active funds, compared to around $760,000 with an ETF tracking the index. Over the past 10 years the gap has widened further, with active funds underperforming the index by nearly 3.5 percentage points annually on average.
Date: April 16, 2026