The Historical Record on Active versus Passive Mutual Fund Performance

Abstract

This study examines the risk-adjusted performance of actively managed mutual funds versus passively managed mutual funds between 1991 and 2019 and finds that there is no statistically significant difference in performance between the two types of funds when the passively managed funds are compared to competitively priced actively managed funds. The practical implication of this study is that, setting tax considerations aside, as long as investors are cost-conscious in their fund selection process, investing in passively managed funds does not meaningfully improve investor outcomes.