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.
Bottom line up front: If you're choosing funds based on past performance, you're likely wasting your time and money. Comprehensive research spanning decades reveals that consistent outperformance among active fund managers is so rare it might as well be random chance — and the few exceptions typically reflect luck rather than skill. The investment industry loves to remind us that "past performance is no guarantee of future results," yet this disclaimer appears to fall on deaf
TEBI
May 26, 20256 min read
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