AI Rally Leaves Active Equity Success at 28.4% — Morningstar

Morningstar published its Active/Passive Barometer for the first half of 2026, covering about 32,000 Europe-domiciled funds that represent roughly half of assets in the European fund market.

The report found global equity markets finished H1 2026 near record highs, driven by AI-related capital investment and corporate earnings growth. The concentration of returns in a small number of technology stocks coincided with a drop in short-term outcomes for active equity managers, whose one-year success rate fell to 28.4%.

That one-year rate was down from 30.5% at the end of 2025 and slightly below 28.7% a year earlier. Longer-term success rates were lower: 20.3% over three years, 15.2% over five years and 11.9% over ten years.

Results differed by region and category. The US large-cap blend category recorded a one-year active success rate of 33.9%. In the UK large-cap category the one-year rate dropped to 15.6% from 47.0% a year earlier, in a period that included political instability and highly concentrated market returns.

Active bond managers continued to record higher success rates than active equity managers overall, but bond performance weakened in H1. The one-year success rate for active bond managers declined to 46.8% from 54.8% at the end of 2025. Government bond segments, especially GBP government bonds, offered stronger opportunities for active selection amid fiscal and political uncertainty and shifting yields.

Morningstar’s analysis found that lower-cost active funds have higher odds of success over time, reflecting the impact of fees on investor returns.

Eugene Gorbatikov, Morningstar’s analyst for passive strategies, commented that the first half of 2026 was dominated by equity markets and high concentration across global equities made it difficult for many active managers to match technology-sector momentum. He added that while active bond managers posted higher one-year success rates than equity peers, overall performance weakened and fees remained a major determinant of long-term results.

The barometer is published semi-annually to track how active funds perform against passive benchmarks across Europe-domiciled funds under prevailing market conditions.