The S&P Dow Jones Indices SPIVA (S&P Indices Versus Active) Scorecard has been an industry standard for benchmarking active versus passive performance, and the study has consistently delivered a damning verdict on active management. In fact, in 2025, the study found that 79% of all active large cap U.S. equity funds underperformed the S&P 500.
Over the last 20 years, about 92% of domestic funds underperformed their benchmarks. But a recent study sponsored by the Investment Adviser Association’s Active Managers Council argues that the SPIVA Scorecard understates the performance of actively managed mutual funds.
The 40-page research was conducted by three academics who have previously studied active versus passive management: professors K. J. Martijn Cremers (University of Notre Dame), Jon Fulkerson (University of Dayton) and Timothy B. Riley (corresponding author) (University of Arkansas). The professors decided to run the same calculations as the SPIVA Scorecard, with three major changes that they believe better align with investor experience.
For one, in the SPIVA Scorecard, any funds that exit during the sample period are considered to have underperformed. The IAA study takes into account the performance of funds during their time prior to exit. Riley said this was important because, regardless of whether they survived, many funds still delivered significant value to investors before they exited.
“It’s that hard and fast rule they have of saying, ‘if you don’t survive, then you automatically underperform,’ that we try to modify. And we just say, ‘For however long you’re there, we’re going to evaluate you over that period,’” he said.
Second, while the SPIVA Scorecard weights all funds equally regardless of size, the IAA report weights results by fund assets, since the vast majority of assets are concentrated in a very small number of funds. The SPIVA Scorecard gives a lot of weight to very small funds that few investors are using.
“We think that aligns much better with the investor experience because it thinks about the actual dollars people had rather than the funds,” Riley said. “We think it makes a lot more sense to focus on where all the investor’s money actually was placed rather than just the distribution of funds.”
Third, the IAA report compares active funds to passively managed mutual funds rather than to hypothetical benchmarks.
“It’s very natural to make those comparisons, but from an investor standpoint, it’s not actually the correct comparison because I can’t buy the S&P 500,” he said. “I can’t buy the Russell 2000. I can’t buy the Agg, but what I can do is I can buy passive funds that attempt to track that.”
After making those three changes, the academics found that 55% of assets underperformed, down from 92%, and that half of the investment categories saw a majority of their active fund assets outperform.
“Put another way, rather than overwhelming underperformance, our results suggest that the probability of outperformance for a given dollar invested in the U.S. equity class over the last 20 years approximated a coin flip,” the study said.
“That’s a 55% chance based on random selection, but there’s a lot of guidance in the academic literature that shows that there are various variables you can use to help you select funds better than just picking at random chance,” Riley said.
The results were even more striking in fixed income, going from 71% of funds underperforming over the last 10 years to 37%. Riley said that is consistent with other research he and Cremers are working on, showing that in the fixed-income space, there’s tremendous value in active management.
In a statement, S&P Dow Jones Indices said its scorecards are rooted in a rigorous methodology.
“For decades, SPIVA has served as a trusted voice in the active versus passive investment debate, delivering transparent and objective data on the performance of actively managed funds relative to their respective benchmarks, along with a range of deeper statistics and analysis,” the company said.
“It is important to note that SPIVA measures the proportion of funds that underperform, rather than the proportion of assets,” it added. “This approach provides a clear view of fund manager performance independent of fund size. The fundamental claim of active management is the ability to ‘beat the market’—not to outperform a basket of index funds. SPIVA aligns with a long-standing tradition of evaluating this specific claim by comparing active funds to broad, capitalization-weighted, investable market benchmarks.”
Neil Bathon, managing partner at FUSE Research Network, said there are components of the data that the authors could have gotten into, but chose not to. He said that’s because they wanted to stay as close as possible to the foundational research.
For one, taxes make a big difference and should be factored into the investor’s actual experience, Bathon said. For example, any fund with high turnover, even if it’s a large cap core fund, will have greater capital gains taxes.
“I don’t think you can do it by looking at broad categories,” he said. “I looked at just large cap core yesterday, and there are some incredibly concentrated funds. So technically they fit into the category, but they’re really, really different than a broad-based index. And they shouldn’t even be compared to the index because it’s not an apples-to-apples comparison.”
Bathon also had an issue with weighting the funds by assets because there are things funds can do in the early days to generate returns or yields that become harder to do later on. Those tactics aren’t likely to be replicated later. Net sales may be a better way to get at that.
“In the early days, they may have ramped up a nice performance number because of being so much more nimble and investing in things that had a bigger impact,” he said. “So you could have a great 10-year number that puts you ahead of the index and shows that you’ve outperformed, but so much of it may have been accomplished in year one and two.”
