Persistence Scorecard Doesn’t Predict Investor Success
September 2, 2025
It’s a ritual.
S&P Dow Jones Indices publishes its Persistence Scorecard, as it does periodically. The Scorecard shows that – yet again – actively managed funds haven’t been able to achieve a year-after-year outperformance in certain time periods. Its publication prompts a series of news reports, op eds and social media commentary that – yet again – bemoan the shortcomings of active management.
But, as with any ritual, the persistence discussion has taken on a life of its own.
It’s time to stop and ask a fundamental question: does the Persistence Scorecard add value for investors?
The answer is “no.”
That’s because the Persistence Scorecard uses a strained definition of persistence. Specifically, it calculates the percentage of funds in a category that outperform in every year in a three-years period (a “three-peat”) or every year in a five-year period (a “five-peat”).
Unfortunately, “three-peats” and “five-peats” don’t mean much for investors: long-term performance matters, not short-term persistence. In fact, actively managed funds don’t need year after year outperformance to generate long-term value for investors.
The numbers tell the story: The funds with the best returns over the long term almost all experience shorter periods of underperformance.
To illustrate, we looked at the performance of the 170+ actively managed large-cap blend funds (both open-end and exchange-traded) with 20-year track records as of the end of July 2025. We used the lowest-cost share class to develop this list. We then zeroed in on the 25 funds with the best performance history.
These 25 funds have done a great job for shareholders. An investor putting $1,000 into these funds 20 years ago would have somewhat over $8,500 in their account after holding them for 20 years, an annual return of 11.3%. By contrast, investors in the S&P 500 would have earned only 10.7% per year, ending up with over $7,500 after 20 years.
However, while these funds generated outstanding results over the long haul, results varied quite a bit over the short term. In fact, these funds were almost as likely to underperform as they were to outperform; on average, they trailed the S&P 500 in 9 of the 20 years. Even top-ranked funds have periods at the bottom.
As for “three-peats,” all of these top performers had at least one three-year period when they outperformed in every year, but these periods were uncommon. In total, the 25 funds had three-year winning streaks only 68 times or in just 15% of all the rolling three-year periods.
And “five-peats” were even less likely – occurring only 11 times, a mere 5% of all the rolling five-year periods. Notably, 17 of the 25 funds never experienced five consecutive years of outperformance.
The lack of connection between persistence and long-term results led Morningstar’s Jeffrey Ptak, writing in December 2018, to characterize persistence as a “red herring.” The title of his article says it all: “Quit Chasing Unicorns: Consistent Fund Performance is Overrated.”
In sum, it’s time to end the ritual. Investors — and the media reporting on investment news — should give the Persistence Scorecard the short shrift that it deserves.
Data source: Morningstar
Originally published in October 2019; updated August 2025.