Active Bond Funds Outdraw Passive Peers in Europe

Active fixed-income funds attracted €47.5 billion in European inflows in the second quarter of 2026, compared with €36.5 billion for passive bond funds. Over the 10 years through June, 33.5% of active bond funds survived and outperformed comparable passive strategies.

The figures from Morningstar exclude money-market funds. Passive strategies accounted for 75% of total European fund inflows during the quarter. Passive equity funds received €89.9 billion, while active equity funds recorded €17.8 billion in outflows.

Morningstar’s European Active/Passive Barometer found that 46.8% of active bond funds survived and outperformed the passive composite for their category in the year through June 2026. The rate was 51.1% over three years and 47.5% over five years. Active equity managers had a 10-year success rate of 11.9%.

Mara Dobrescu, a senior principal at Morningstar, attributed the difference to bond-market structure. “The case for active management is fundamentally stronger in fixed income than in equities because bond markets are structurally less efficient,” she said.

Traditional bond indexes generally give larger weights to the biggest borrowers, while equity indexes assign larger weights to companies with higher market values. Bond markets also contain millions of individual securities, many of which trade infrequently. Active managers can use differences in credit quality, interest-rate exposure, liquidity and individual bonds when making investment decisions.

Dobrescu identified less liquid, less uniform and more complex market segments as areas with greater scope for security selection. Over 10 years, active euro corporate bond funds had a 45.3% success rate. The rate was 40.9% for global emerging-market bond funds and 46.5% for local-currency emerging-market debt funds.

Results were lower for government bonds. Active euro government-bond funds had an 18.5% 10-year success rate, while funds investing in British government bonds had a 10.3% rate.

Fees also affected results. Active fixed-income funds in Morningstar’s lowest-fee quintile had a 40.7% 10-year success rate, compared with 24.6% for funds in the highest-fee quintile. Dobrescu described the strongest case as “reasonably priced active strategies operating in segments where market inefficiencies remain meaningful.”