Active managers fall further behind indexes

Fewer stock pickers are beating their indexes, with value managers among the worst performers. Just 36% of actively managed stock funds topped indexes in the year through June, down from 43% in 2017, according to a Morningstar Inc. report. Pickers of value stocks saw their success rates drop as much as 27 percentage points compared with the prior year. Low-cost index funds, such as those offered by Vanguard Group, have been gaining market share for years as stock and bond pickers struggle to beat markets net of fees. As investors flock to index funds, firms have been slashing costs. This month, Fidelity Investments began offering two indexed mutual funds for free. More: Fidelity zero-fee funds unleash the power of free Managers of intermediate-term bond funds were the only category to beat indexes, with more than 70% of actively run funds outperforming their benchmarks over the year through June. But the success rate of these managers also declined from the prior year. "Active managers in the category have been rewarded handsomely for assuming credit risk as both investment-grade and below-investment-grade credits have enjoyed a sustained rally," the report's authors Ben Johnson, Alex Bryan and Adam McCullough wrote. More: Active money management is not going to disappear The Morningstar report examined results of 4,500 active and passive U.S. mutual and exchange-trade funds with approximately $16.1 trillion in assets, or about 79% of the U.S. market.