How many active funds beat the market?
Although it is very difficult, the market can be beaten. Every year, some managers boast better numbers than the market indices. A small fraction even manages to do so over a longer period. Over the horizon of the last 20 years, less than 10% of U.S. actively managed funds have beaten the market.
Research: 89% of fund managers fail to beat the market
According to this report, 88.99% of large-cap US funds have underperformed the S&P500 index over ten years. As a whole, 78–97% of actively managed stock funds failed to beat the indexes they were benchmarked against over ten years.
According to a study by S&P Dow Jones Indices, only 24.2% of hedge fund managers were able to outperform the market in 2019. This means that the vast majority of hedge fund managers were not able to beat the market, despite their high fees and promises of superior returns.
Fund | 2023 performance (%) | 5yr performance (%) |
---|---|---|
MS INVF US Insight | 52.26 | 34.65 |
Sands Capital US Select Growth Fund | 51.3 | 76.97 |
Natixis Loomis Sayles US Growth Equity | 49.56 | 111.67 |
T. Rowe Price US Blue Chip Equity | 49.54 | 81.57 |
Actively managed investments charge larger fees to pay for the extensive research and analysis required to beat index returns. But although many managers succeed in this goal each year, few are able to beat the markets consistently, Wharton faculty members say.
S&P Dow Jones Indices' scorecard compares the performance of actively-managed mutual funds to major indices. It found that over the course of one year, 51.08% of actively-managed mutual funds underperformed the S&P 500, and 48.92% of actively-managed funds outperformed the S&P 500.
Commonly called the S&P 500, it's one of the most popular benchmarks of the overall U.S. stock market performance. Everybody tries to beat it, but few succeed.
Berkshire Hathaway's CEO, Warren Buffett, widely considered to be the most successful investor alive today, has merely matched the market's return over the past two decades. The fundamental question this raises for investors is how long we should give a manager the benefit of the doubt when failing to beat the market.
From 2010 through 2021, anywhere from 55 percent to 87 percent of actively managed funds that invest in S&P 500 stocks couldn't beat that benchmark in any given year.
Data from an article by The American Enterprise Institute charted the average hedge fund's performance from 2011 to 2020. Over that stretch, the typical hedge fund underperformed the S&P 500 every single year. Again, there will be an occasional manager who outperforms, but rarely does it last long.
How many hedge funds beat the S&P?
This year's Top 50 Hedge Funds – according to new research from Global Investment Report – collectively outpaced the market over the trailing five years through 2022 by more than three full percentage points, and did so with considerably less risk than the S&P 500.
Therefore, an investor in a hedge fund is commonly regarded as an accredited investor. This means that they meet a required minimum level of income or assets. Typical investors are institutional investors, such as pension funds and insurance companies, and wealthy individuals.
(NASDAQ:DXCM) and Medpace Holdings, Inc. (NASDAQ:MEDP) are the only two healthcare sector companies that have made it onto our list of 13 stocks that outperform the S&P 500 every year for the last 5 years. The shares of DexCom, Inc.
MarketWatch spotlights VanEck Morningstar Wide Moat ETF (MOAT), consistently outperforming the S&P 500 by targeting companies with long-term competitive advantages or "economic moats."
I put my personal 401(k) and a lot of my mutual fund investing in four types of mutual funds: growth, growth and income, aggressive growth, and international.
Of the nearly 3,000 active funds included in our analysis, 47% survived and outperformed their average passive peer in 2023.
Ticker | Name | 5-year return (%) |
---|---|---|
PBFDX | Payson Total Return | 16.73% |
FGRTX | Fidelity Mega Cap Stock | 16.52% |
STSEX | BlackRock Exchange BlackRock | 16.27% |
USBOX | Pear Tree Quality Ordinary | 16.13% |
Active managers held a 57% success rate, up from 38% in 2022. Mortality and distribution of 10-year annualized excess returns for surviving active intermediate-core bonds. Although just half of funds survived the full period, 63% of the ones that did succeeded.
Index investing features lower fees, greater tax efficiency, and broad diversification. Research shows that over the long-run, passive indexing strategies tend to outperform their active counterparts.
No. 1 on the list is the ProFunds Semiconductor UltraSector Fund, which yielded 29.21% over the past decade. In second place is the Direxion Monthly NASDAQ-100 Bull 1.75X Fund, with 28.16%. And the bronze medal goes to the Rydex NASDAQ-100 2x Strategy Fund, which yielded 26.58%.
What are the top 5 performing mutual funds?
- Victory Nasdaq-100 Index (USNQX)
- Shelton Nasdaq-100 Index Investor (NASDX)
- Fidelity Large Cap Growth Index (FSPGX)
- Schwab U.S. Large-Cap Growth Index (SWLGX)
- AB Large Cap Growth Advisor (APGYX)
- T.
Even the Oracle of Omaha, widely considered one of the most successful investors, has not been able to outperform the booming S&P 500 in recent years. The stock of Warren Buffett's holding company Berkshire Hathaway has nearly equaled the return of the S&P 500 for the past two decades, according to MarketWatch.
“In my view, for most people, the best thing to do is own the S&P 500 index fund,” Buffett said at Berkshire's 2020 annual meeting. Buffett's thinking here is straightforward. Most non-professional investors (and even many professional stock-pickers) have very little chance of outperforming the market.
If you had invested in Netflix ten years ago, you're probably feeling pretty good about your investment today. According to our calculations, a $1000 investment made in February 2014 would be worth $9,138.15, or a gain of 813.81%, as of February 12, 2024, and this return excludes dividends but includes price increases.
“What we'd really like to do is buy great businesses,” he said. “If we could buy a company for $50 billion or $75 billion, $100 billion, we could do it.” “It would be easier to do with a private company,” he said.
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