Nick Donato is a financial adviser at Guidance Financial Services who specialises in helping clients all over Australia aged 30 to 50 get their financial foundations sorted, so they can build wealth and have more choice in life through our Wealth Builder program. You can learn more about it here.

The short answer: most of them do not. S&P Dow Jones Indices' SPIVA Australia Mid-Year 2026 Scorecard, published 7 September 2026, found that 89% of Australian Equity General funds underperformed the S&P/ASX 200 over the 15 years to 30 June 2026. In the first half of 2026, nearly 78% underperformed, and the average active fund returned 0.2% against 2.4% for the index. Whether a particular active fund earns its fee generally depends on the fee itself, the market the fund invests in, and how its returns compare with its own benchmark after fees over a long period rather than a good year or two. Past performance is not a reliable indicator of future performance.

This is the article version of a recent episode of the Wealth Builder podcast, where Paul Benson and I worked through the latest figures.

Here's what makes this question interesting.

Active fund managers are not amateurs. They employ teams of analysts. They visit the companies. They model the earnings. They have access to information and expertise no individual investor could assemble on a weekend.

If anyone should be able to beat the market, it's them.

Most of them don't.

What percentage of actively managed funds beat the index?

Over the 15 years to 30 June 2026, about 11% of Australian Equity General funds beat the S&P/ASX 200. The other 89% fell short.

Australian Equity General is S&P's category for funds investing across the broad Australian share market.

The short-term picture was worse. The same scorecard found nearly 78% underperformed in the first half of 2026.

The size of the gap was the part that surprised us on the podcast. It wasn't a near miss. Over those six months, the average active fund returned 0.2%. The S&P/ASX 200 returned 2.4%.

The figures are also harder to argue with than a typical performance table, because of how SPIVA is built. Returns are measured after fees, and the comparison starts with every fund available at the beginning of the period, including the ones that later closed or merged. S&P describes this as accounting for the entire opportunity set rather than just the survivors.

That last part matters more than it sounds. Fewer than half the funds operating in early 2011 were still operating by the middle of 2026. A comparison that quietly dropped them would look kinder to active management than this one does.

Figures as at 30 June 2026. Past performance is not a reliable indicator of future performance.

Why do active funds underperform?

There's no single reason. Four come up repeatedly, and they compound on each other.

1. Fees. An active fund has analysts, research and trading costs to pay for, and those costs come out of returns before an investor sees them. A fund has to beat the index by more than its fee just to match it.

2. Finding a good company and finding a good investment are two different jobs. A business can have strong profits, capable management and a genuinely bright future, and have all of that already reflected in its share price. Every other professional is reading the same accounts. Being right about the company is not the same as being right about the price.

3. The market is concentrated, so missing a few companies hurts. In the first half of 2026, only 35% of S&P/ASX 200 constituents beat the index. That's 70 companies out of 200. The other 130 trailed it. The winners won by enough to carry everything else, which means a portfolio that missed them had very little chance of keeping up.

4. The biggest companies are often the ones doing the carrying. BHP rose around 30% over that half, driven largely by copper prices. But an active manager's job is usually to find the overlooked and the underpriced. Loading up on the largest company in the index is not the trade most of them are hired to make.

Then there's the awkward pattern where expensive-looking companies keep getting more expensive. Commonwealth Bank has been described as fully priced for years and has kept climbing. Nvidia, in the US, has looked too dear at almost every point in the past decade. Talking yourself into buying either would have been difficult.

Owning the index meant owning them anyway, without needing a view.

What about the argument that this year will be different?

It comes up at almost every fund manager presentation, and it tends to follow the same shape.

Yes, indexing has done better. But conditions are changing. Volatility is returning, or rates are turning, or markets are narrowing, and this is precisely the environment where active management proves its worth.

There's always something to point to.

Sooner or later you'd expect the argument to be right. Markets do change. But the 15-year figure has sat around that level for years, and the most recent half-year was worse than usual rather than better.

None of which proves active management can never work. It means the case for it keeps being made in advance and keeps not turning up in the data afterwards.

Index fund, ETF or managed fund: what's the difference?

These three words get used as though they describe the same choice. They don't, and the confusion costs people clarity about what they actually own.

Active or index describes the strategy. An active fund chooses investments and aims to beat a benchmark. An index fund aims to track one.

Listed or unlisted describes the structure. An ETF is itself a managed fund, one that trades on an exchange like a share. An unlisted managed fund is bought and sold directly with the fund manager instead. ASIC's Moneysmart covers both under the same heading for that reason.

So "ETF" does not mean "index", and it isn't the opposite of "managed fund" either. An ETF can be active or index, and index strategies are available unlisted too. The useful questions are what the fund holds, how it decides what to hold, and what it charges. The label on the front won't answer any of those.

At Guidance we use an index-at-the-core approach, which is what it sounds like: index investments do most of the work, and anything else has to earn its place. We've written separately about how index investing works and about how much to hold in Australian shares.

Settling for the market return sounds less ambitious than it actually is. It means participating in the growth and income of every business in that market, without having to outsmart everyone else buying and selling them.

Are managed funds worth the fees?

It depends on what the fee buys, which is a question worth asking of any fund rather than assuming the answer either way.

A higher fee is not automatically bad value. Some funds invest in markets where an index is harder or costlier to track. Some run strategies with no index equivalent at all.

What the data does suggest is that a higher fee has not been a reliable predictor of better returns in the broad Australian share market. Over long periods the great majority of those funds have not beaten a low-cost alternative after fees.

The comparison that tends to matter is a fund's return against its own benchmark, after fees, over a long period. A single strong year says very little.

In super, the investment option selected usually determines whether the money sits in active or index investments, and for a lot of people that option was never chosen so much as defaulted into.

Do active funds do better in small caps?

The figures aren't uniformly grim, and it's worth saying so.

The same SPIVA scorecard found that around 60% of Australian mid and small-cap funds underperformed their benchmark over 15 years. Still a majority, but a long way from 89%.

That fits what you'd expect. Smaller companies get less analyst coverage and less attention, so there's more scope for research to turn up something the market hasn't priced. The large end of the Australian market, by contrast, is a handful of banks and miners that thousands of professionals examine daily.

So the honest version of the argument isn't that active management never works. It's that beating the index has been hardest in exactly the part of the market where most Australian investors hold most of their money.

[NON-COMMODITY SLOT: Nick, of the people who come in already holding an active fund, roughly what proportion have never compared it against its own benchmark? And what do they usually say when they see it? Generalise so nobody is identifiable. One real pattern here is worth more than another paragraph of data.]

How does this fit into an actual investment strategy?

Choosing between active and index investments is one decision, and on its own it isn't the one doing the most work.

Where the investments are held matters. So does how they sit alongside super, a mortgage, an employer share scheme and a tax position. Two people can hold the same fund and have it doing completely different jobs.

Timeframe is the part most often skipped. Being in your 30s or 40s doesn't mean every dollar has thirty years to run. Some of that money might be for a home upgrade, a stretch of reduced hours, or simply having options well before retirement. Money needed sooner has a different job from money invested for decades, and the two are rarely best held the same way.

Choosing an index approach simplifies investment selection. It doesn't decide the strategy. An Australian share fund, a global share fund and a bond fund all do different jobs, and something still has to decide how much of each, held where, and for how long.

Which is why adding another fund can leave someone with more holdings and no closer to an answer. A portfolio is meant to have a job, rather than be a collection of funds that might eventually add up to enough.

For someone in their 30s or 40s with a good income, the useful question is usually not which fund to own. It's whether the whole arrangement is capable of getting them where they're trying to go.

That's what our Wealth Builder program is built for: working out how investments, super, debt and tax fit together, rather than treating fund selection as a standalone decision.

So, is it worth chasing the better manager?

Some of them will beat the market. The difficulty has always been knowing which ones in advance, and staying with them long enough for it to matter.

A few questions worth sitting with:

Do you know whether your super is invested actively or in index options?
If you hold a managed fund, how has it performed against its own benchmark, after fees, over five or ten years?
Is your investment approach something you chose, or something you ended up with?

They're better questions than which fund had a good year, and they tend to be the ones worth sorting out before another decade goes past unexamined.

Want to know whether your investment approach suits what you're trying to achieve? Book an appointment with Guidance Financial Services and we'll work through it together. We don't have our own investment products to promote.

In your 30s or 40s and earning well? Wealth Builder helps you turn today's income into long-term wealth, with a plan that covers investing, super, debt and tax together.

Learn more about our Wealth Builder program

Common questions

Do active funds beat index funds?

Over the 15 years to 30 June 2026, about 11% of Australian Equity General funds beat the S&P/ASX 200, according to S&P Dow Jones Indices' SPIVA Australia Mid-Year 2026 Scorecard. Results vary by market and by period, and figures like these describe past performance rather than predicting future results.

Are index funds better than actively managed funds?

Better depends on what is being asked of the investment. Index funds have generally delivered closer to the market return at a lower cost, and over long periods most Australian Equity General funds have not beaten that. An index fund will not beat its market either, and it falls when the market falls. A portfolio can hold both, provided each holding has a clear purpose and its costs and overlap with everything else are understood.

Should I sell my active fund and switch to an index fund?

Historical underperformance figures on their own don't answer that for any particular investor. The things that generally bear on it are the role the fund plays in the wider portfolio, its fees, how it has performed against an appropriate benchmark over a long period, and whether selling would trigger capital gains tax or transaction costs. That combination is specific enough to a person's circumstances that it usually warrants personal advice, and tax consequences are worth confirming with a registered tax agent.

Why do actively managed funds exist?

Some do outperform, and outperformance in a given year attracts attention and money. Active funds also cover strategies and markets where no index alternative exists, and many investors hold them through default super options or platforms without having made an active choice. Fund managers also have a commercial incentive to keep offering them.

Are managed funds safe?

Managed funds are regulated investments, but they carry investment risk and their value can fall. A fund holding shares will generally fall when share markets fall, whether it is actively managed or index-based. Diversification can reduce the impact of any single company performing poorly, but it does not remove the risk of loss.

This article is for educational purposes only and does not take into account your individual circumstances. If you would like tailored advice, we can help you work through the numbers properly.