A shocking number of fund managers have failed to outperform the market
It’s been a dreadful decade for active fund managers. Just 24% of the active funds analysed in AJ Bell’s Manager versus Machine report have beaten a passive alternative in the last 10 years. This is the lowest reading since the report was launched in 2021.
Even if active managers start to turn things around, as they seemed to be in the first half of this year, it’s going to be a long uphill battle. We have witnessed some signs of active outperformance in recent years, but they have been patchy and short-lived.
Proportion of active managers outperforming a passive alternative
| IA sector | 2025 YTD* | 5 years | 10 years |
|---|---|---|---|
| Asia Pacific Ex Japan | 43% | 16% | 33% |
| Europe ex UK | 23% | 29% | 24% |
| Global | 25% | 13% | 13% |
| Global Emerging Markets | 48% | 42% | 48% |
| Japan | 52% | 36% | 53% |
| North America | 22% | 17% | 13% |
| UK All Companies | 16% | 13% | 17% |
| Total | 29% | 20% | 24% |
Source: AJ Bell and Morningstar, total return in GBP to 30 November 2025.
Why has the last decade been so bad for active managers?
The dismal long-term numbers have been driven by weak performance in three critical sectors: global funds, US funds, and UK funds.
One of the driving forces behind the success of passive funds across all these markets has been the outperformance of large cap stocks. Active managers tend to be underweight this top end of the market. Or to look at it another way, tracker funds are structurally overweight the largest companies in the market.
It’s notable that in the first Manager versus Machine report published in 2021, 56% of active managers in the study outperformed a comparable index fund over 10 years. That was a much healthier picture for active managers, driven by 85% of UK active funds outperforming their passive counterparts.
It’s no coincidence that over the 10-year period up to December 2021, small and midcaps significantly outperformed UK blue chips, as the table below shows. That put UK active managers on the front foot, but the pendulum has now swung decisively in the other direction.
This perspective suggests the dismal run experienced by active fund managers over the last decade is heavily influenced by longstanding market conditions, rather than simply stemming from a structural flaw in active management.
A resurgence in small and mid-caps could help lift the numbers towards respectability for active managers, likewise the big blue chips coming a cropper.
Want to know more? Read the latest report to learn about trends in the active and passive space.
Laith Khalaf: Head of Investment Analysis
Laith Khalaf is AJ Bell's Head of Investment Analysis. He joined the company in 2020 and continues to explore the world of personal investing, providing research and analysis to both AJ Bell customers and the...
