2025 Active vs. Passive Investing: What the Latest Historical Data Suggest

A debate that continues to evolve

The active versus passive investing debate continues to evolve, especially as market conditions shift and new performance data emerge.

Each year, we revisit this discussion with a quantitative and qualitative analysis of historical data to help retirement plan sponsors make informed fiduciary decisions.

Our research focuses on investment categories commonly offered in 401(k) and 403(b) plans and evaluates how actively managed mutual funds perform relative to their benchmarks over multiple time periods.

How we evaluate active vs. passive

Rather than relying on broad market comparisons, we assess performance within specific investment categories relevant to participant-directed retirement plans, such as large cap value, small cap growth, core bond...etc.

Our analysis considers:

• multiple trailing time periods over 15 years;
• a mutual fund’s institutional share class (commonly used in retirement plans — one share class per fund);
• equal-weighted comparisons across funds; and
• the potential impact of survivorship bias.

This structured approach helps create a more practical lens for fiduciaries making lineup decisions.

Get the full analysis and clear charts

In an environment shaped by shifting inflation dynamics and monetary policy, maintaining an objective, research-driven perspective is critical.

Our latest report outlines:

• the methodology behind our analysis;
• investment categories where a relatively high percentage of active managers have outperformed designated benchmarks;
• investment categories where passive strategies are prudent to attain broad exposure to a given category; and
• practical considerations for retirement plan fiduciaries.

As markets evolve, it remains essential to have a balanced approach that’s grounded in historical and current data.