Active vs. Passive: the 2024 results are here 📪
The Sandbox Daily (3.4.2025)
Welcome, Sandbox friends.
Today’s Daily discusses:
active managers underperform (15 years and counting)
Let’s dig in.
Blake
Markets in review
EQUITIES: Nasdaq 100 -0.36% | Russell 2000 -1.08% | S&P 500 -1.22% | Dow -1.55%
FIXED INCOME: Barclays Agg Bond -0.25% | High Yield -0.01% | 2yr UST 3.984% | 10yr UST 4.242%
COMMODITIES: Brent Crude -0.74% to $71.09/barrel. Gold +0.93% to $2,928.2/oz.
BITCOIN: +0.89% to $87,355
US DOLLAR INDEX: -1.09% to 105.581
CBOE TOTAL PUT/CALL RATIO: 0.94
VIX: +3.20% to 23.51
Quote of the day
“Much of the stress that people feel doesn't come from having too much to do. It comes from not finishing what they've started.”
- David Allen, Getting Things Done: The Art of Stress-Free Productivity
Active managers underperform, again
Each year, S&P Global publishes their “SPIVA* Scorecard” that compares actively managed funds against their appropriate benchmarks so the investing public can better understand the performance of investment managers.
Two common themes have emerged over time:
Actively managed funds have historically tended to underperform their benchmark over short- and long-term time horizons.
Even when actively managed funds in a category have outperformed their benchmark over one time period, the chance of that same fund’s persistent and continued outperformance is unlikely because most have failed to do so over multiple time frames.
2024 was no different: 65% of all active large-cap U.S. equity funds underperformed the S&P 500 index.
The average underperformance rate for the U.S. large-cap category over the 24-year history of the SPIVA research report is 64%.
2024 marks 15 consecutive years in which the majority of fund managers failed to beat its benchmark.
What’s more, the underperformance results are amplified as the time horizon expands.
76% of fund managers underperformed the index over a 5-year time horizon.
84% over 10-years.
92% over 20-years.
The continued underperformance delivered by active managers illustrates three important takeaways for investors at home:
Performance: Outperforming the market is extremely difficult, even for professionals with significant resources at their disposal.
Fees: Active investment managers are not able to pick enough winners to justify their higher fee structure compared to passive investment structures.
Risk: Active funds often have higher Active Share by taking on different positions and/or different size exposures versus its benchmark, which results in greater tracking error. In plain English, investors might not own what they intended to own.
*SPIVA stands for S&P Indices Versus Active
Source: S&P Dow Jones Indices
That’s all for today.
Blake
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Welcome to The Sandbox Daily, a daily curation of relevant research at the intersection of markets, economics, and lifestyle. We are committed to delivering high-quality and timely content to help investors make sense of capital markets.
Blake Millard is the Director of Investments at Sandbox Financial Partners, a Registered Investment Advisor. All opinions expressed here are solely his opinion and do not express or reflect the opinion of Sandbox Financial Partners. This Substack channel is for informational purposes only and should not be construed as investment advice. The information and opinions provided within should not be taken as specific advice on the merits of any investment decision by the reader. Investors should conduct their own due diligence regarding the prospects of any security discussed herein based on such investors’ own review of publicly available information. Clients of Sandbox Financial Partners may maintain positions in the markets, indexes, corporations, and/or securities discussed within The Sandbox Daily. Any projections, market outlooks, or estimates stated here are forward looking statements and are inherently unreliable; they are based upon certain assumptions and should not be construed to be indicative of the actual events that will occur.
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