Every scorecard season the same headline goes around: most active managers lost to the index again. For 2025 the number was 79% of active U.S. large-cap equity funds trailing the S&P 500, up sharply from 65% the year before, and the fourth-worst showing for stock pickers in the 25-year history of the SPIVA scorecards.
That number usually gets passed around as a mic drop. It is a lot more interesting than that, and most of what makes it interesting lives in the methodology rather than the headline.
What SPIVA actually measures
SPIVA stands for S&P Indices Versus Active. Twice a year, S&P Dow Jones Indices compares the returns of actively managed funds against the benchmark those funds are actually trying to beat, over 1-, 3-, 5-, 10-, 15-, and 20-year windows. Two design choices do most of the analytical work.
The first is that returns are measured net of fees. That sounds like a detail. It is not, because costs compound in exactly the same way returns do. Take two funds that both earn 8% gross every year for 30 years on a $100,000 starting balance. One charges 0.03%, roughly what a broad U.S. index fund costs today. The other charges 0.65%, a fairly ordinary active equity expense ratio.
0.03% fee -> 7.97% net -> $997,914
0.65% fee -> 7.35% net -> $839,579The gap is about $158,000, larger than the original investment, and the two managers were assumed to be equally good. A stock picker charging 0.65% is not trying to match the index. They are trying to beat it by more than 0.62 percentage points a year, every year, forever.
The second choice is survivorship adjustment. Roughly 40% of U.S. domestic equity funds close over a given ten-year window; observed ten-year survival rates run around 58% for equity funds and 54% for fixed income. Funds close overwhelmingly because they performed badly and investors left. Most performance databases quietly drop those funds from history, which systematically deletes the worst results and flatters the industry's record. SPIVA counts them.
Persistence is the harder problem
Grant, for the sake of argument, that some managers really do have skill. The practical question is not whether outperformance exists but whether you can identify it in advance, and that is where the companion Persistence Scorecard lands hardest.
Of the U.S. large-cap funds sitting in the top performance quartile as of 2020, not one was still in the top quartile at the end of 2024. Zero. Over five-year windows, only about 4.2% of U.S. funds and 6.1% of European funds managed to stay in the top half the whole way through. If fund performance were pure coin-flipping, you would expect 6.25% to stay in the top half four periods running. U.S. funds came in under the coin flip.
That is the claim worth taking seriously, and it is narrower than "active management does not work." It is that a strong track record is a weak predictor, which is unfortunate, because a track record is the main thing a fund shopper is handed.
Where the argument gets more interesting
Three things complicate the tidy version of this story.
The passive/active line is dissolving. Active ETFs held about $52 billion in 2016 and roughly $1.5 trillion by the end of 2025, growing 64% in that year alone, with nearly 1,000 new active ETFs launched. The SEC has now cleared more than 30 asset managers to bolt an ETF share class onto existing mutual funds. The ETF wrapper's real advantages, lower cost and better tax treatment, are being decoupled from the question of whether anyone is picking stocks inside it. "Index fund versus active fund" and "ETF versus mutual fund" were never the same argument; from here they are visibly not.
Market conditions move the number. S&P's own commentary on the 2025 result points at relentless large-cap outperformance crowding out the opportunities stock pickers need. When a handful of enormous companies drive most of the index return, a manager who owns anything else falls behind. Part of that 79% is market breadth, not manager skill, which is why the ten- and twenty-year columns are more informative than any single year.
An index fund is not a neutral default. A cap-weighted index quietly encodes a position: hold more of whatever has already grown largest, accept whatever concentration that produces. That has been an excellent bet recently. It is still a bet, and pretending otherwise is its own kind of overconfidence.
If this is a live question for you, the scorecards themselves are free and short. Pull the SPIVA U.S. Scorecard and the Persistence Scorecard directly from S&P Dow Jones Indices, skip past the one-year headline, and read the long-horizon and survivorship tables. That is where the argument is actually settled, or at least where it stops being a slogan.