Active managers stumble again in 2025 as large caps dominate

Active stock and bond managers had a tough time keeping up with their benchmarks in 2025, even as markets delivered strong returns across the board, according to the latest SPIVA U.S. Scorecard from S&P Dow Jones Indices.

For those reassessing active allocations after another big year for US equities, the headline number is hard to ignore: the SPIVA report found that “79% of all active large-cap U.S. equity funds underperformed the S&P 500,” up from 65% in 2024 and the fourth-worst showing for large-cap managers in the 25-year history of the study.

Large caps again set the pace, with the S&P 500 gaining 18% and logging 39 record highs, helped by a rebound in Big Tech and optimism around Federal Reserve rate cuts. Powered by AI-related enthusiasm toward the largest technology names, US equities staged a sharp comeback in 2025 after early-year turmoil, with expectations for easier policy extending the rally into mid- and small-cap names.

The universe of US stocks continued to revolve around large caps, which maintained their dominant outperformance across styles and regions. By the report's reckoning, the S&P 500 beat the S&P MidCap 400 by 10% and the S&P SmallCap 600 by 12%.

Meanwhile, mid- and small-cap managers struggled to deliver persistent alpha, with some 55% of all mid-cap funds and 41% of all small-cap funds falling short of their benchmarks despite having the ability to tilt up the market-cap spectrum to chase performance. Enthusiasm for Fed cuts helped the S&P MidCap 400 and S&P SmallCap 600 finish the year up 8% and 6%, respectively, but that lift did not translate into broad-based outperformance for active strategies in those segments.

International and global equity managers fared no better. The study said 63% of international funds and 76% of global funds underperformed their respective indexes, a result that appears tied to country bets as much as stock selection. With the US making up more than 70% of the S&P World Index and the S&P World Ex-US Index outperforming the S&P World by 11% in 2025, managers who were overweight domestic equities “may have been hurt accordingly,” the report noted.

From a pure performance standpoint, international benchmarks outpaced US stocks. All 38 category benchmarks in the scorecard posted positive returns, led by the S&P Developed Ex-US SmallCap and S&P World Ex-US indices, which gained 35% and 33%, respectively, and outstripped the S&P 500 by a double-digit margin in US dollar terms. For advisors, that gap underscores how a home-country bias toward US equities could have dragged on global and international fund results, even in a year when domestic large caps delivered strong absolute gains.

Read more: De-dollarization is real, and advisors need a plan

Conditions in fixed income were not much kinder. “Results for bond managers were poor, with a cross-category average underperformance rate of 70%,” the report said, compared with 62% across equities.

In core taxable categories, 82% of general investment-grade and 76% of high-yield funds trailed their benchmarks. The main exception was emerging market debt, where only 31% of funds underperformed, helped in part by a weaker US dollar and an environment that rewarded longer duration and higher-yielding bonds.