SPIVA Mid-Year 2025: Global Active Fund Underperformance Analysis

This analysis is based on the Seeking Alpha report [1] published on November 13, 2025, covering S&P Dow Jones Indices’ mid-year 2025 SPIVA Scorecard results. The report demonstrates the persistent challenge active fund managers face in outperforming passive benchmarks across global markets [1].

The SPIVA results reveal that

spanning 11 regions globally [1]. This continues a long-term pattern where active outperformance remains rare, particularly over extended time horizons. The data shows significant regional variations that reflect different market structures and efficiency levels:

• Brazil
  : Exceptional performance with only 17% of managers underperforming the S&P Brazil LargeCap
• South Africa
  : Challenging environment with 92% underperforming against the S&P South Africa 50
• Emerging Markets
  : Generally favorable conditions with most funds outperforming benchmarks
• International and Global Equity
  : More difficult environment for beating respective benchmarks [1]

The report highlights a complex market environment in H1 2025, described as a “

” [1]. Key structural factors affecting active management include:

: Improvement in stock-level opportunities with , showing significant improvement compared to 2023 and 2024 when mega-cap dominance created challenging conditions [1].

: The transition between market phases created additional complexity, with H2 2025 seeing sustained large-cap outperformance. The as of November 6, 2025 [1], indicating renewed concentration in large-cap stocks.

: Despite [1], creating favorable conditions for global managers, [1], suggesting implementation challenges even with tailwinds.

The U.S. large-cap category, the most closely watched segment, showed

which represents an improvement and puts the market on track for the lowest annual underperformance rate since 2022 [1]. This suggests some relief for active managers compared to recent challenging years, though the majority still underperformed.

The dramatic variation between regions (Brazil’s 17% vs. South Africa’s 92% underperformance) suggests that market structure, development level, and efficiency significantly impact active management potential [1]. Less efficient markets appear to provide more opportunities for skilled active managers, while highly efficient markets present greater challenges.

The finding that 58% of global managers underperformed despite a 9% tailwind from international outperformance [1] reveals a significant implementation gap. This suggests that even when macro conditions favor active strategies, execution, stock selection, and portfolio construction remain challenging.

The improvement to 44% of S&P 500 stocks beating the index [1] represents a more favorable environment for fundamental stock picking compared to recent years dominated by mega-cap concentration. However, the subsequent shift back to large-cap dominance in H2 2025 demonstrates the rapidly changing nature of market conditions.

: The return to large-cap dominance in H2 2025 [1] suggests increasing concentration risk, potentially making active diversification strategies more challenging and increasing the importance of mega-cap exposure.

: Current market data shows the S&P 500 trading at elevated valuations with a P/E ratio of 28.86 [0]. Combined with historical active underperformance patterns, this suggests future returns may be constrained for both active and passive strategies.

: The market’s significant shift between H1 and H2 2025 [1] indicates elevated style rotation risk, where active managers may be positioned incorrectly for changing market regimes, potentially leading to underperformance.

: Historical data shows active funds typically charge ~0.66% annually vs. ~0.05% for index funds [2], creating significant headwinds that must be overcome through performance alone.

: The significant variation in regional performance suggests opportunities for managers with specialized expertise in less efficient markets like Brazil [1].

: The “tale of two markets” environment [1] suggests opportunities for managers who can successfully navigate regime changes and adjust positioning accordingly.

: The 9% outperformance of S&P World Ex-U.S. Index [1] indicates potential benefits from strategic global allocation, though implementation remains challenging.

: The improved breadth with 44% of stocks beating the index [1] suggests better conditions for fundamental stock pickers compared to recent mega-cap dominated periods.

The SPIVA mid-year 2025 results provide comprehensive evidence that active fund management continues to face significant challenges in outperforming passive benchmarks globally [1]. The 54% overall underperformance rate across 11 regions reinforces the long-term trend of active management difficulties, though regional variations reveal important nuances.

Market structure analysis shows a complex environment with shifting conditions between H1 and H2 2025 [1]. While stock selection opportunities improved with 44% of S&P 500 stocks beating the index, the subsequent return to large-cap dominance created challenges for managers underweighting mega-cap stocks.

The data suggests that successful active management requires either specialized regional expertise, particularly in less efficient markets, or superior ability to navigate changing market regimes. For most investors, the results continue to support passive allocation as the default strategic choice, with active management requiring strong justification through demonstrated capability or access to market inefficiencies.

Current market conditions with elevated valuations (S&P 500 P/E of 28.86) [0] and ongoing concentration risk suggest that future active management success may depend increasingly on manager skill in identifying opportunities within a challenging environment.