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Study: Active Funds Deliver at Comparable Rates to Passive

Study: Active Funds Deliver at Comparable Rates to Passive

December 21, 2022

Active funds are posting on-par performances with their passive peers, according to new research from T. Rowe Price.

The Baltimore-based firm analyzed its own funds and funds from other firms. It found that all actively managed funds, excluding T. Rowe’s, beat their passive counterparts 47% of the time net of fees.

In addition, it found that active funds in the five largest active management firms by AUM in the mutual fund space, beat their passive peers 62% of the time, net of fees.

“While passive funds have a place in some client portfolios, active management that is executed properly and consistently can deliver more attractive returns over the long term,” said Eric Veiel, CFA, T. Rowe Price Head of Global Equity and Chief Investment Officer.

The study looked at monthly rolling 10-year periods over the last 20 years to reach its conclusion. More than 10,700 active funds were compared to their passive averages, which represented 3,109 passive funds.

The review presents a contrast to the often-cited SPIVA and Morningstar reports, which use different methodology in calculating their scorecards.

“This research is consistent with the Council’s work on the important role that both active and passive management can play for clients,” said Karen Barr, IAA President & CEO.  “The Council’s research has found that active managers can outperform and investors can identify skilled active managers in advance.”

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