Active management delivered vastly different results depending on geography in 2025, with international equity managers finding opportunities that eluded their U.S.-focused counterparts, according to Morningstar’s latest Active/Passive Barometer.
The divergence offers investors a roadmap for where active management has historically added value. Emerging markets and international equity categories showed higher long-term success rates than domestic strategies, according to the report.
Active managers in the diversified emerging markets category saw their success rates jump 42.3 percentage points from 2024 to 64.1% in 2025, according to Morningstar. Winning managers capitalized on country and sector bets, including South Korean tech stocks, that passive benchmarks often missed or misclassified.
The contrast with U.S. equity markets was stark, according to the report. Active managers in the large growth category posted just a 17.2% success rate in 2025. Meanwhile, large blend managers achieved a 32.1% success rate. The data reflects the percentage of active funds that survived and outperformed their average passive peer.
Long-Term Trends Favor International Active Strategies
Fixed-income active managers faced headwinds as well, according to Morningstar. Corporate bond managers saw success rates plummet 63 percentage points to 4.4% in 2025. The changing shape of the yield curve created a sweet spot in the 5–7 year maturity range where passive funds concentrated. That gave them a benchmark advantage that active managers struggled to overcome.
Over 10 years through 2025, active funds in foreign large value and diversified emerging markets categories showed higher success rates than U.S. large-cap categories, according to the report. The foreign large value category posted a 24.3% 10-year success rate while diversified emerging markets achieved 29.1%. U.S. large growth active funds, by contrast, posted just a 1.1% 10-year success rate.
Cost remained a critical factor across all categories, according to Morningstar. Active funds in the cheapest quintile succeeded nearly twice as often as the priciest funds over 10 years, with success rates of 31% versus 17%. The data suggests investors seeking active management should prioritize lower-cost options in categories where active managers have demonstrated an edge, particularly in international and emerging markets.
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