The long-running battle between active and passive fund management has taken another turn, with fresh research from investment platform AJ Bell revealing that fewer than half of active funds managed to beat their cheaper, index-tracking counterparts in the first half of 2026.
According to the firm's latest Manager vs Machine report, just 42% of actively managed funds outperformed a passive alternative during the six-month period — the same proportion as a year earlier. The figures are particularly stark for UK-focused funds, where only 19% beat their passive peers, and for global equity funds, where the success rate fell to 22%.
Dan Coatsworth, head of markets at AJ Bell, described the overall data as a “huge embarrassment for the active fund management industry”. He noted that a handful of global equity managers did outperform by a significant margin, but that the broader trend points to persistent underperformance, with five and ten-year data reinforcing the picture. “Low costs and broad exposure to companies around the world make passive funds easy-to-understand investment products,” he said.
One factor behind the struggle, Coatsworth explained, is market concentration. The MSCI World index, for example, contains more than 1,200 stocks but the top ten account for over 25% of its value, heavily weighted towards technology giants. Any manager with less exposure to those blockbuster names than the benchmark would have found it difficult to keep pace. Meanwhile, sectors that performed well in 2025 — such as gold mining, defence, and pharmaceuticals — lost momentum in the first half of 2026, potentially catching active managers off guard.
There were some bright spots: nearly two-thirds of active funds in the Asia Pacific ex-Japan (65%) and Global Emerging Markets (63%) sectors beat their passive equivalents. Dan Cartridge, fund manager at Hawksmoor Fund Managers, pointed to academic research suggesting that the decline in active fund performance since 2010 correlates with the surge in passive fund market share from 19% to 50%, arguing that the issue may not be declining skill but structural market shifts.
For UK households and investors, the findings underscore the importance of understanding what they are paying for. While passive funds offer low-cost, broad market exposure, active funds carry higher fees and — as the data shows — often fail to deliver the outperformance that justifies those charges. The Bank of England's interest rate decisions and broader economic conditions continue to influence which sectors perform, but the long-term evidence suggests that for many, a blended approach combining passive core holdings with selective active bets may be the most sensible strategy. As always, individuals should consult a qualified financial adviser before making investment decisions.