The index funds vs active funds debate got its 2026 update on September 17, when S&P Dow Jones Indices published the SPIVA U.S. Scorecard for the first half of the year: 67% of actively managed large-cap U.S. equity funds underperformed the S&P 500 in the six months to June 30, 2026, a period in which the index gained about 10% [1]. That is better for active managers than 2025, when 79% trailed, but the long-run figures are unchanged in direction: 77% of large-cap funds lagged over three years, 89% over five years and 93% over twenty years [1][2]. Lower fees, not stock picking, remain the most reliable source of excess return.
Index funds vs active funds: what the 2026 SPIVA scorecard shows
| Category (first half of 2026) | Share of active funds underperforming benchmark |
|---|---|
| U.S. large-cap | 67% |
| U.S. mid-cap | 74% |
| U.S. small-cap | 69% |
| International | 49% |
| Emerging markets | 38% |
Data: SPIVA U.S. Scorecard Mid-Year 2026, as summarized by TKer and The Idea Farm [1][2].
The first half of 2026 was, on paper, a favorable environment for stock pickers: dispersion between stocks rose and correlations fell, conditions that usually help active management [1]. Yet two thirds of large-cap managers still lagged, and mid-cap and small-cap managers did worse, at 74% and 69% [2]. International and emerging market managers were the exception, with a majority beating their benchmarks over the half, a result that SPIVA history suggests rarely persists over longer horizons [2].
Why 2025 was one of the worst years for active managers
The full-year 2025 scorecard recorded a 79% underperformance rate for large-cap funds, up from 65% in 2024 and the fourth-worst year in the 25-year history of the report [3][4]. Mid-cap managers did better, with 55% trailing, and small-cap managers best of all, with 41% trailing, which meant a majority of small-cap active funds beat their benchmark in 2025 [3][4]. International funds trailed at a 63% rate, global funds at 76%, emerging market funds at 53% and international small-cap funds at 70% [3].
Fixed income was no refuge. Across bond categories 70% of active funds underperformed in 2025, including 82% of general investment-grade funds and 76% of high-yield funds; only emerging market debt managers, at a 31% underperformance rate, mostly beat their index [3][4]. Bond funds' fee ratios are high relative to yields, which makes the hurdle especially hard to clear.
The horizon effect
The most useful SPIVA number is not any single year but the way underperformance rises with time. For large-cap funds the mid-2026 figures run from 67% over six months to 77% over three years, 89% over five years and 93% over twenty years [1]. A fund that beats the index one year is likely to give it back in another, and fees compound against it every year. This is roughly the 17th consecutive year in which a majority of large-cap managers have lagged the S&P 500 [1].
Fees explain most of the gap
The mechanics are simple. The Vanguard S&P 500 ETF (VOO) charges 0.03%, while Vanguard reports the average S&P 500 index fund charged 0.41% as of December 31, 2025; active large-cap funds typically charge more still [5]. An active fund must therefore beat the index by its fee just to match an index ETF, and it must do so after the trading costs of its own turnover. VOO's turnover rate was 2.4% in its most recent fiscal year [5]. Over the ten years to June 30, 2026, VOO returned 15.47% a year against 15.51% for the index, a tracking gap of 0.04 points; an active fund charging 0.7 points a year starts each year that far behind [5].
What the evidence suggests for investors
- Core in index funds: for U.S. large caps, where 89% of active funds lagged over five years, a low-cost S&P 500 or total market ETF is the evidence-based default [1].
- Be selective where the odds are better: small-cap (41% lagging in 2025) and emerging market debt (31%) are categories where active management has more often paid, though not consistently [3][4].
- Judge managers over full cycles: a good six months, like early 2026 for international managers, is not evidence of skill [2].
- Look at the fee first: cost is the most consistent predictor of relative performance in SPIVA data, which is why the 0.03% index ETFs set the bar [5].
Two thirds of large-cap active funds trailed the S&P 500 in the first half of 2026 and 93% trailed over twenty years, so the burden of proof remains on active management.
Investors can compare index ETFs by fee, holdings and performance on DataPorium's ETF analytics page [6].
Key takeaways
- 67% of large-cap active funds underperformed the S&P 500 in the first half of 2026, versus 79% in 2025 [1][3].
- Over 20 years to June 30, 2026, 93% of large-cap funds trailed the index [1].
- Mid-cap (74%) and small-cap (69%) managers did worse than large-cap in the first half of 2026 [2].
- In 2025, 70% of active bond funds underperformed, including 82% of investment-grade funds [3][4].
- An index ETF such as VOO costs 0.03% and tracked its index within 0.04 points a year over ten years [5].
Frequently asked questions
What percentage of active funds beat the S&P 500 in 2026?
In the first half of 2026, 33% of large-cap active funds beat the S&P 500 and 67% underperformed, according to the SPIVA U.S. Mid-Year 2026 Scorecard [1].
Do active funds beat index funds over the long term?
Rarely. SPIVA data to June 30, 2026 show 89% of large-cap active funds trailing over five years and 93% over twenty years [1].
What is the SPIVA scorecard?
SPIVA (S&P Indices Versus Active) is a semiannual report from S&P Dow Jones Indices that measures the share of actively managed funds that underperform their benchmark index across equity and bond categories and time horizons [1][2].
Are there categories where active management works?
In 2025 a majority of small-cap funds (59%) and emerging market debt funds (69%) beat their benchmarks, and in the first half of 2026 a majority of international and emerging market equity funds did [2][3].
Sources & References
- [1] TKer: Most stock-picking pros have been underperforming this year (SPIVA U.S. Mid-Year 2026 summary)
- [2] The Idea Farm: SPIVA U.S. Mid-Year 2026
- [3] Markets Group: SPIVA U.S. Scorecard, Active vs. Passive Fund Performance (Year-End 2025 results)
- [4] InvestmentNews: Active managers stumble again in 2025 as large caps dominate
- [5] Vanguard S&P 500 ETF (VOO) Fact Sheet as of June 30, 2026
- [6] DataPorium ETF Analytics: Holdings, Flows and Performance
