--- title: "Active Funds vs Index Funds: How to Read the SPIVA Scorecard" description: "The SPIVA scorecard is the usual evidence in any active funds vs index funds argument. What it counts, why one year says little, and why fees are only half the explanation." author: "Sarah Fontaine" category: "How Financial Instruments Work" date: 2026-10-21T14:05:02.069Z canonical: "https://investormuse.com/blog/spiva-scorecard-active-funds-vs-index-funds" --- # Active Funds vs Index Funds: How to Read the SPIVA Scorecard ![Variant 1](https://hsppuvezyxmkpzkgfkho.supabase.co/storage/v1/object/public/media/enrichment/ab61daa9-7ea0-4beb-a6f6-f91f26625675/98b62df1-c04a-41de-a556-c982d762acc5/35ca07b9-2d70-4767-9c14-995f3da3cbb2.png) > The SPIVA scorecard is the usual evidence in any active funds vs index funds argument. What it counts, why one year says little, and why fees are only half the explanation. When people argue about active funds vs index funds, the SPIVA scorecard is usually the document they are arguing about without having opened it. Its 2025 edition recorded 79 per cent of active United States large-cap equity funds finishing behind the S&P 500, against 65 per cent a year earlier, which [S&P Dow Jones Indices ranks as the fourth-weakest showing in the scorecard's twenty-five-year history](https://www.spglobal.com/spdji/en/spiva/article/spiva-us-year-end-2025/). The useful question is not whether that number is bad. It is what the number is measuring. ## What the Scorecard Is Counting The acronym unpacks as S&P Indices Versus Active. Every six months the publisher lines thousands of active funds up beside whichever index each one says it is trying to match, so a large-cap United States fund meets the S&P 500 and a mid-cap fund meets the MidCap 400. One proportion comes out: how many funds in a category finished behind their own yardstick over a stated window. Two design choices make it worth reading. Like meets like, so nobody is scored against an index they never tried to match. And the count takes in each fund in a category, the ones that shut down partway through included, which stops the tally quietly crediting only survivors. A fund company's own performance page has no such obligation. ## Why the Laggard Share Climbs Three mechanisms push the proportion up, and they tend to arrive together. - **Narrow leadership.** When a small group of enormous companies produces most of the index return, a manager holding anything else starts the year in arrears. - **The cost floor.** An active fund has to clear its own expenses before it draws level with a benchmark that pays none. The SEC's own guidance is blunt that [fees and expenses reduce what an investor keeps](https://www.investor.gov/introduction-investing/investing-basics/investment-products/mutual-funds-and-exchange-traded-funds-etfs/mutual-funds), and that holds whatever the manager does. - **Idle cash.** A fund that keeps money uninvested to meet redemptions trails a fully invested index whenever prices rise. 2025 supplied all three at once. The S&P 500 finished ten percentage points clear of the MidCap 400, and twelve clear of the SmallCap 600, [on the scorecard's own accounting](https://www.spglobal.com/spdji/en/spiva/article/spiva-us-year-end-2025/), so anything that strayed down the size scale paid for the detour. ## Why It Falls Again Run the same mechanisms backwards and the proportion drops. In a stretch where smaller companies or markets outside the United States lead, a manager who held them looks good next to a large-cap yardstick, and the laggard share falls without a single manager getting better at the job. The shape of the market moved. The scorecard reported the move. This is why a single edition settles nothing, and why the long windows are the ones worth reading. ## The Ten-Year Window, and the Accounts That Pay Less Stretch the period and the picture stops wobbling. The institutional edition of the scorecard, covering money run for pension schemes and similar clients, puts the after-fee result at [80 per cent or more of equity funds behind their yardsticks across the decade ending 31 December 2025](https://www.spglobal.com/spdji/en/documents/spiva/spiva-institutional-scorecard-year-end-2025.pdf), with at least half of fixed income funds in the same position. These are clients paying institutional rates with research staff of their own, and the ten-year result landed in broadly the same place as it did for retail mutual funds. Buffett made the practical version of this argument to Berkshire Hathaway shareholders in [his 1996 letter](https://www.berkshirehathaway.com/letters/1996.html), long before the scorecards existed, when he suggested that a low-cost index fund was the sensible route for most investors precisely because it would beat what the majority of professionals delivered after their costs. A decade later he put the mechanism more sharply, writing in the 2005 letter that owners [must earn less than their businesses earn](https://www.berkshirehathaway.com/letters/2005ltr.pdf) because of frictional costs. The scorecard is that sentence turned into a table. ## The Second Scorecard Almost Nobody Opens There is a companion report that answers the obvious follow-up: do the funds that win keep winning? S&P's persistence work tracks top-quartile funds forward, and the year-end 2025 edition found that 29 per cent of the large-cap funds in the top quartile for 2023 were still there two years later, while over the five years from 2021 [no top-quartile fund in any reported active domestic equity category held its place](https://www.spglobal.com/spdji/en/spiva/article/us-persistence-scorecard/), apart from small-cap funds, where 2 per cent did. The reference point matters as much as the figures. S&P notes that under pure chance you would expect half of the winners from one five-year stretch to win the next one, and the reported categories came nowhere near that, [in the same persistence report](https://www.spglobal.com/spdji/en/spiva/article/us-persistence-scorecard/). A ranking of last year's leaders is therefore not a shortlist. It is a list of funds that have already had their good run. ## Five Ways the Number Gets Misread Treating the proportion as a league table is the first. It counts how many funds fell short. It names nobody, predicts nobody, and offers no way to pick the minority in advance. Judging a fund against the wrong index is the second. SPIVA publishes separate tables for mid-cap, small-cap, international, global and bond categories, and the results differ enough between them that a mismatch can reverse the conclusion entirely. Reading it as proof that active management never works is the third. A minority of funds genuinely do clear their benchmark across long periods. The scorecard's claim is narrower and harder: they are a small group, and identifying them before the fact is the part nobody has solved. Ignoring what the index itself holds is the fourth. A broad fund owns whatever the market weights, so when a few companies dominate, buying the index buys them in size. That concentration is the subject of our piece on [reading the largest technology names through a value lens](/how-value-investor-should-read-big-tech). The fifth runs the opposite way: taking one weak year for active management as a reason to pile into whichever companies the index weights most heavily. An index fund copies the market's risks along with its returns, and switching on the strength of a single statistic is the kind of move examined in [why careful investors make careless choices](/smart-investors-dumb-decisions-behavioral-finance). ## Blaming the Fees Is the Comfortable Half of the Answer The standard explanation for the SPIVA results is cost, and it is correct as far as it goes. The argument here is that it does not go far enough, and that stopping there leaves readers with a tidy story that the data does not fully support. The institutional scorecard is where it comes apart. Measured before any fees were taken out, 67 per cent of institutional accounts and 75 per cent of wrap accounts still trailed the index in 2025, [on S&P's gross-of-fees basis](https://www.spglobal.com/spdji/en/documents/spiva/spiva-institutional-scorecard-year-end-2025.pdf). Strip the costs away entirely and a clear majority is still behind. Something other than the expense ratio is doing the work. That something is the shape of the return distribution. Index returns lean heavily on a small number of very large winners, which means a portfolio that omits any of them starts the race carrying a deficit no amount of good judgement elsewhere reliably repays. That arithmetic is laid out in our piece on [how few shares produce the market's gains](/most-stocks-lose-to-treasury-bills-bessembinder), and it explains why skill and cost are separate questions that get merged in most coverage. A stretch in which index returns are broad rather than concentrated would test this reading. If the gross-of-fees gap narrowed sharply in such a period while the after-fee gap held, the cost story would be the dominant explanation after all, and this argument would be the weaker one. Fees are still the part an investor can actually control, which is why [what an expense ratio does over time](/expense-ratio-explained-fee-drag) deserves attention regardless. ## One Year of This Is Weather A single scorecard tells you what shape the market took last year. Ten years of it tells you how hard the job is after costs. Check which window you are reading, check which index the fund was measured against, and treat the headline proportion as a description of difficulty rather than a verdict on anyone. *This article is for educational and informational purposes only. It is not financial advice, and Investor Muse is not a registered investment advisor. Historical figures describe the past and do not predict future results. Speak with a qualified professional before you make decisions about your money.* *Position disclosure: neither Investor Muse nor its editorial team holds a position in any company, fund or security named in this article.* ## FAQ ### What does SPIVA stand for? S&P Indices Versus Active. It is the scorecard published twice a year by S&P Dow Jones Indices, which compares active funds against the index matching each fund's declared style and counts every fund in the category, including those that closed. ### Does the scorecard prove active management does not work? No. It shows that most funds trail their benchmark over long periods and that the winners rarely repeat. Some funds do beat their index across a decade. The difficulty the scorecard documents is picking those funds before the fact rather than after. ### Why did active large-cap funds have such a poor 2025? Index leadership was narrow and concentrated in the largest companies, and the S&P 500 beat the mid-cap and small-cap indices by wide margins. A manager holding anything further down the size scale paid for that choice regardless of how well the individual picks worked out. ### Is the whole gap explained by fees? Not on S&P's own figures. Measured gross of fees, a majority of institutional accounts still finished behind the S&P 500 in 2025. Costs make the gap worse, but the concentration of index returns in a few very large winners accounts for a large part of it. --- Source: https://investormuse.com/blog/spiva-scorecard-active-funds-vs-index-funds