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.
When markets look expensive, valuation anxiety pushes investors to brace for a crash. But history suggests the real risk is quieter — long stretches of disappointing real returns that erode wealth slowly, without the dramatic fall investors expect.
Robin Powell
Feb 1010 min read
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