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Why active funds underperform even when the manager picks well
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.
Robin Powell
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Explanation-based investing: a better name than passive?
In this guest post, William Morris introduces the idea of explanation-based investing as a fresh alternative to the often-misunderstood term “passive investing.” He argues that what investors really need isn’t to be active or passive, but to understand the reasoning behind their choices. Clear explanations, grounded in evidence, can help people make better decisions and achieve stronger long-term outcomes.
Robin Powell
Sep 17, 20255 min read
The hidden costs of passive investing: how significant are they?
The hidden costs of passive investing can add hundreds of basis points annually beyond headline fees. New research reveals how index funds face invisible expenses from rebalancing friction, tracking errors, and market impact that never appear on fund fact sheets. UK investors may pay far more than the advertised 0.1% management charge.
TEBI
Jul 14, 202511 min read
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