Study: SPIVA overstates active managers’ underperformance

The Active Managers Council of the Investment Adviser Association released a working paper that challenges the S&P Dow Jones Indices SPIVA scorecard’s estimates of how often active managers underperform passive peers. Using 2024 data, the paper reports SPIVA’s 92 percent figure for active U.S. equity funds over 20 years falls to 55 percent after adjusted calculations. For U.S. bond funds, SPIVA’s 71 percent over the past decade falls to 37 percent under the paper’s method.

The authors adjusted three key empirical choices in the SPIVA framework. They weighted results by fund assets instead of treating each fund equally, compared active funds to actual passive fund equivalents rather than hypothetical benchmarks, and included performance of funds that were later liquidated up to their exit dates instead of counting closures as automatic failures.

The study was prepared by Timothy Riley of the University of Arkansas, K.J. Martijn Cremers of the University of Notre Dame and Jon Fulkerson of the University of Dayton. The authors plan to submit the working paper for peer review. Riley wrote that modifying these empirical choices identifies substantially more value and better aligns the results with the typical mutual fund investor experience.

S&P Dow Jones Indices defended the SPIVA methodology, saying the scorecard measures the proportion of funds that underperform, not the proportion of assets. S&P argued that measuring funds rather than assets isolates manager performance from fund size and follows a long-standing approach of comparing active funds to broad, capitalization-weighted, investable market benchmarks. The firm described the SPIVA methodology as transparent and rigorous.

Karen Barr, chief executive of the Investment Adviser Association, urged advisors and clients to examine performance scorecards carefully when choosing between active and passive funds and noted the association supported the research without endorsing specific findings.

Industry data show passive funds surpassed active funds in total assets two years ago and have captured the majority of new inflows across major asset classes. Research numbers cited in the working paper indicate 38 percent of active funds and ETFs outperformed passive peers in 2025 and 21 percent did so over the prior decade. Active mutual funds have recorded roughly $4.7 trillion in net outflows over the past 20 years.

Practitioners continue to combine active and passive approaches. Michael Hollis, founder of a registered investment advisory firm in Illinois, described his approach as rules-based while incorporating both active selection and passive exposure. He said reexamining the evidence influenced how he intends to construct client portfolios.

The authors recommend shifting the focus from the share of funds that underperform to the share of assets that underperform equivalent passive funds. S&P and the paper’s authors disagree on which comparison best reflects the claim that active management should beat the market. The two sets of results provide different measures for investors and advisors to consider when evaluating fund strategies.