In 2019, 48% of active U.S. stock funds survived and outperformed their average passive counterparts, compared with 38% in calendar year 2018, Morningstar reported Thursday.
Morningstar’s semiannual report spans some 4,400 unique funds that account for approximately $13.8 trillion in assets, or about two-thirds of the U.S. fund market.
Active funds’ success rates year over year increased in 14 of 20 categories considered in the report. Forty-seven percent of active funds beat the passive composite for their category in the year.
Among U.S. stock-pickers, small-cap funds experienced the biggest rebound in one-year success rates, as 57% of these funds outpaced the average of the passive funds in their categories, up 25 percentage points from 2018.
The gap between large- and small-caps’ performance doubled last year relative to 2018. This helped to lift small-cap managers’ success rates, as they tended to favor large-cap names, according to Morningstar.
Active funds’ one-year success rate in the corporate-bond category spiraled downward in 2019. The report said a generally riskier credit profile and shorter duration versus passive peers hurt these funds during a year when higher-quality credits outperformed and interest rates declined.
Morningstar noted that actively managed funds have failed to survive and beat their benchmarks, especially over longer time horizons. In the 10-year period ended in December, only 23% of all active funds topped the average of their passive rivals.
Long-term success rates were generally higher among foreign-stock funds and bond funds and lowest among U.S. large-cap funds.