August 28, 2026
The SPIVA studies, now an unavoidable reference, state that 87% of US equity funds underperform their index over ten years. Yet this conclusion deserves a more nuanced examination. Simple methodological adjustments drastically reduce this gap, while real investment conditions differ markedly from the theoretical framework of these comparisons. The choice between active and passive management is not a matter of universal truth, but of considered allocation according to market segments and cost structures.
The SPIVA studies are a solid benchmark. Over ten years, 87% of US equity funds post performance below that of their reference index, after deduction of management fees. This finding is based on exhaustive data and represents an objective reality.
However, an academic study by Martijn Cremers, Jon Fulkerson and Tim Riley reveals a fundamental element: by changing three key methodological assumptions, the gap narrows considerably. Over the long term, the share of underperforming active funds then falls to around 55%, against more than 90% under a conventional interpretation. This divergence does not stem from ideological criticism, but from technical measurement choices that better reflect the reality of actual portfolios.
The SPIVA methodology incorporates three structural biases.
First, any fund that has disappeared is penalised as an underperforming fund. This survivorship bias effectively reshapes the statistics, since a portfolio that closes is often a poorly managed one. Second, each fund is weighted identically, regardless of its size. A small fund managing €10 million counts exactly as much as a €10 billion fund. Finally, indices are compared without fees, while active funds include them. Yet in practice an investor chooses between an active fund that carries costs and a passive ETF, which also has fees, however small.
An index is not a viable investment: it is a theoretical reference. It is subject to none of the operational constraints a manager faces. It has no concentration limits (regulatory or prudential), does not manage capital outflows, and does not hold available cash. This allows it to let a few positions grow without limit.
In the first quarter of 2025, the five largest capitalisations in the S&P 500 accounted for up to 78% of the index's overall performance. An active fund that complies with diversification rules or meets redemption requests cannot operate in the same way. Comparing active management subject to these constraints with an unconstrained index amounts to evaluating two fundamentally different strategies.
That said, fees remain the main obstacle for active management. The higher they are, the more value the manager must create simply to match the index's performance, before even beating it.
An active fund charging 1% in annual fees must generate at least +1% of outperformance every year, all else being equal. For a passive ETF with fees of around 0.05%, the hurdle is infinitely lower. This mathematical mechanism explains why passive management often wins the average comparison: it has no initial handicap to make up.
In liquid US large caps, very low-fee ETFs retain a structural advantage that is hard to get around. These markets are efficient, widely arbitraged, and prices quickly incorporate available information. In this context, beating the index durably requires either a superior view of the market or a different, consciously assumed risk-taking.
In bonds, small caps, less developed markets or highly concentrated portfolios (sector-based, geographic), active management can regain greater relevance. These areas offer more durable inefficiencies, wider price spreads and selection opportunities. A competent manager, with specialised expertise and suitable research resources, has a better chance of creating value there.
Management that is truly active, differentiated and with contained fees sharply reduces the initial handicap. Moving from 1.5% to 0.50% in annual fees radically changes the probability of outperformance. And if this active management rests on genuine strategic conviction rather than a generic attempt to beat the index, the odds improve further.
Passive management often wins the average comparison, particularly in efficient and liquid segments. The real value of active management appears above all when the market is less efficient, the index less representative of the available opportunities, and fees low enough not to cancel out the manager's efforts.
The optimal allocation is therefore neither universally active nor universally passive: it is segmented, aware of its costs and clear-eyed about the methodological asymmetries that aggregate statistics conceal.
This is not investment advice.
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