According to the latest data from Standard & Poor’s, most passive index funds, including exchange traded funds, beat out the performance of actively managed mutual funds. There are a few exceptions, but on the whole, active management is not outperforming.
“There is nothing novel about the index versus active debate,” the new S&P Indices Versus Active Funds Scorecard (SPIVA) report notes. “It has been a contentious subject for decades, and there are a few strong believers on both sides, with the vast majority of investors falling somewhere in between.”
Many market watchers are saying that ETFs are posing significant headwinds for actively managed funds and the managers who run them. Morningstar data claims that of ETF and mutual fund market share, only about 12% is represented by ETFs. That means there is a lot more potential for ETFs to gain assets.
The S&P report also highlighted that passive management also wins out over the long term time frame. Most active managers fail to outperform their benchmarks over the long term, reports Rob Silverblatt for US News. [Investors Tired of Lagging Active Funds Pile Into ETFs]
The trend also repeats itself when it comes to bond funds. Take, for instance, actively managed long government bond funds. Over the past five years, 93.62 % of them trailed the Barclays Long Government index, reports Silverblatt.