At the end of 2025, the one-year success rate for active equity managers across 39 categories stood at 31.2%, only modestly higher than the 29.2% recorded in June 2025 and at year-end 2024. Over three years, the success rate fell to 19.9%; over five years, to 15.4%; and over 10 years, to just 11.4% (see chart 1).
Chart 1: Active Equity Managers’ 2025 Year-End Performance (%) Source: Morningstar Direct. Data as of Dec. 31, 2025.
Success rate refers to funds that both survived the period and outperformed their passive composite benchmark. While the one-year figure suggests marginal short-term improvement, the multi-year data point to a persistent structural — rather than cyclical — disadvantage.
The trend is not your friend for active managers
In practical terms, fewer than one in nine active equity funds cleared the dual hurdle of survival and outperformance over a decade. More concerning, the trend has deteriorated continuously since 2015, when roughly one in five active funds succeeded (see yellow line in chart 2).
Chart 2: Historical Success Rate of Active Equity Funds (%) Source: Morningstar Direct. Data as of Dec. 31, 2025.
The report highlighted that 2025 was “a veritable year of two halves,” with markets initially unsettled by US trade policy uncertainty before rebounding later in the year. Despite this volatility — a backdrop that might traditionally favour active stock-pickers — passive funds retained a clear long-term advantage in most large-cap segments.
Underperformance across the developed world
The pattern is consistent across major developed markets. In US large-cap blend equities, the one-year success rate improved to 36.8% in 2025, yet the 10-year success rate was only 5.1%.
Eurozone large-cap equities painted an even bleaker picture: a one-year success rate of 17.3% and a 10-year rate of just 3.8% (see chart 3). In other words, more than 95% of active eurozone large-cap managers failed to beat passive alternatives over a decade.
Chart 3: Eurozone Large-Cap Equity Category - Historical Success Rate of Active Equity Funds (%) Source: Morningstar Direct. Data as of Dec. 31, 2025.
The UK large-cap category also illustrates the pattern. Although UK equities rose strongly in the second half of 2025, only 28.0% of active managers outperformed over one year, and just 10.2% did so over 10 years.
Morningstar noted that these figures underscore that even when local markets perform well, active managers as a group struggle to overcome the combined headwinds of fees and market structure. In highly efficient, large-cap markets dominated by mega-cap stocks, the arithmetic of active management — before fees — makes aggregate outperformance mathematically improbable.
Where active still has a fighting chance
There are, however, notable exceptions. Emerging-markets equities remain comparatively fertile ground for active management. The one-year success rate in global emerging-markets equity reached 49.6% in 2025, yet the 10-year rate was still only 19.6%.
While still below 50% over longer periods, these figures are materially higher than in developed large-cap markets, reflecting greater dispersion, embedded inefficiencies, and less concentrated benchmarks.
Indeed, Morningstar observed that active managers tend to achieve higher success rates in mid- and small-cap categories, as well as in segments where passive funds exhibit structural sector biases or high concentration.
Nevertheless, these relative pockets of opportunity have not been sufficient to offset the broader arithmetic of costs.
The fee factor behind fund failure
A crucial persistent insight concerns survivorship. The success rate definition requires both outperformance and survival. Funds that were liquidated or merged away during the period are counted as failures, meaning survival itself is part of the hurdle.
Over 10 years, active equity survivorship dropped significantly, amplifying the gap versus passive funds. The data provider noted that many active strategies fail not only because of weak stock selection but because higher fees compound over time.
Cost dispersion is central to long-term outcomes. The report found that active funds in the cheapest quintiles have materially higher long-term success rates than those in the most expensive quintiles. This reinforced a core conclusion: cost discipline is one of the few reliable predictors of relative success within active equity.
Structural edge: passive prevails
Even in a year marked by currency shifts, tariff uncertainty and regional rotation, passive funds retained the upper hand. Short-term fluctuations may lift one-year success rates, but over three-, five- and 10-year horizons the probability of active outperformance remains persistently low.
For investors, the evidence suggests that broad, low-cost passive exposure continues to offer a higher probability of long-term success in large-cap developed equity markets, while selective active allocation remains more defensible in emerging or less efficient segments.
