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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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Past performance is better at spotting losers than winners
Investors instinctively turn to past performance when choosing funds. But new Morningstar research on 6,003 European funds finds it is far more reliable as a warning sign than a buy signal.
Robin Powell
Jun 293 min read
The performance persistence myth: what new research tells us about the latest hot funds
Chasing last year’s top funds is seductive — and usually self-defeating. New evidence shows performance persistence is largely a mirage: most “winners” slip quickly, especially when markets get rough. Investors who keep costs low and own the market have far better odds of reaching their goals.
Robin Powell
Oct 20, 202511 min read
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