The managers running the biggest active funds picked stocks that beat the market in 2025 — and most still lagged their benchmark. A Morningstar do-nothing experiment and a body of academic research explain why active funds underperform even when the picking is good: skilled buying undone by poor selling, the hidden cost of trading, and the incentives that keep managers churning. The UK evidence points the same way.
A major Morningstar study of more than 5,800 funds has delivered a clear verdict on concentrated funds: they charge higher fees, deliver lower returns, and suffer deeper losses than their more diversified peers. The evidence suggests most investors would be better off on the main road.
Robin Powell
Feb 238 min read
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