Proponents of active management may want to forget what happened in 2018. In fact, if they're large-cap investors, they may want to forget the entire past decade.
Only 38 percent of active U.S. stock funds survived and outperformed their average peer passive fund last year, which was down from 46 percent in 2017, Morningstar said in its year-end "Active/Passive Barometer" report.
The performance was most bleak in the active value segment, with only 26 percent of funds in that category beating their passive fund peers, Morningstar said.
While that was the year-to-year picture, the long-term view of active vs. passive fund performance wasn't any better, according to the Chicago-based research firm. Only 24 percent of all active funds beat their passive fund rivals over the 10-year period ending December 31.
"In general, actively managed funds have failed to survive and beat their benchmarks, especially over longer time horizons," Morningstar said in its report. "Long-term success rates were generally higher among foreign-stock funds and bond funds and lowest among U.S. large-cap funds."
The data is based on the performance of 4,600 U.S. funds that account for about $12.8 trillion in assets, or about 69 percent of the U.S. fund market, Morningstar said.
When looking at the year-over-year performance, active U.S. small value funds were among the worst performers, with only 15.9 percent beating their passive peers, which represented a dramatic drop from 57.6 percent in 2017.
Active mid-cap funds also floundered, with only 22 percent beating their passive counterparts, down from 42.3 percent in 2017.
The study found that, among all active funds, those with the cheapest fees succeeded about twice as often as the most expensive funds over the past decade, with the cheaper funds having a 32.5 percent success rate, compared with 17.2 percent for pricier funds.
"This not only reflects cost advantages, but also differences in surivival, as about two-thirds of the cheapest funds survived, whereas only around half of the most expensive did so," the report said.