S&P Persistence Scorecard Reveals Universal Struggles for Active Strategies

Why It Matters

The findings pressure active managers to justify higher fees and accelerate advisors’ migration to passive vehicles, reshaping asset allocation trends industry‑wide.

Key Takeaways

• <1% of U.S. equity funds stay top‑quartile five years straight
• Mid‑cap and small‑cap funds show zero five‑year top‑quartile persistence
• Active ETFs’ performance persistence mirrors that of mutual funds
• Advisor allocations increasingly favor low‑cost S&P 500 passive ETFs

Pulse Analysis

The S&P Persistence Scorecard, released in early 2026, surveyed the entire universe of domestic equity mutual funds and ETFs, tracking each fund’s rank within its peer group over a five‑year horizon. By measuring how many funds stayed in the top 25 % from 2021 through 2025, the report revealed a stark reality: less than one percent maintained that elite status. The methodology, which treats ETFs and mutual funds identically, highlights that performance persistence is not a function of vehicle type but of underlying investment skill—an attribute that appears exceedingly scarce.

For advisors, the scorecard’s numbers translate into a compelling cost‑benefit analysis. Active strategies, especially in mid‑cap and small‑cap segments, failed to demonstrate any lasting advantage, eroding the justification for their higher expense ratios. Consequently, advisors are reallocating client capital toward ultra‑low‑cost S&P 500 index ETFs, which offer predictable benchmark exposure and minimal fee drag. This migration is reinforced by a data‑driven mindset: when the probability of sustained outperformance approaches zero, the risk‑adjusted return profile of passive funds becomes markedly more attractive.

The broader market implication is a continued consolidation of assets under passive management, potentially reshaping the competitive landscape for active managers. While niche active products—such as those leveraging tax‑efficiency or thematic exposure—may retain pockets of demand, the bulk of retail and institutional flows are likely to gravitate toward core index solutions. Over the next few years, we can expect further pressure on active managers to innovate, either through demonstrable skill, lower fees, or hybrid models that blend passive efficiency with selective active tilts. The scorecard serves as a benchmark for that evolution, signaling that durability, not just short‑term alpha, will be the new yardstick for success.