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Indexing has won the debate in many investors’ minds, but I still think too few people fully appreciate why.
That’s why I was especially excited to sit down with Anu Ganti, Head of U.S. Index Investment Strategy at S&P Dow Jones Indices, on the very day the latest SPIVA U.S. Scorecard was released. SPIVA—short for S&P Indices Versus Active—has become one of the most important scorecards in investing because it offers a clear, data-driven answer to a question investors have wrestled with for decades: how often do active managers actually beat their benchmarks?
In this conversation, Anu and I discuss what the newest SPIVA report showed, why active management remains so difficult over long periods of time, what the persistence data says about trying to identify winning managers in advance, and why the active-versus-passive debate has become more nuanced than many people realize. We also explore the growing role of index-based tools in equities, fixed income, and even private markets.
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The Latest SPIVA Report Showed Another Tough Year For Active Managers (0:26)
I opened the conversation by asking Anu about the newly released SPIVA U.S. Scorecard and what stood out most in this year’s report.
The headline number was striking: 79% of large-cap managers underperformed the S&P 500 over the past year. That alone would be notable, but what made the result especially interesting is the kind of market environment in which it occurred.
Last year included a sharp tariff-related drawdown, a rebound in the S&P 500, and plenty of volatility along the way. In environments like that, investors often say it is a stock picker’s market. The idea is that volatility, dispersion, and shifting leadership should create more opportunities for active managers to add value.
And yet the data still showed broad underperformance. In fact, Anu noted that this was the fourth-worst year in SPIVA’s 25-year history for large-cap manager underperformance, and the worst result since 2021. That is a powerful reminder that even when conditions seem favorable for stock pickers, success is far from guaranteed.
Why A “Stock Picker’s Market” Still Doesn’t Guarantee Active Outperformance (3:36)
One of the most useful parts of the conversation was Anu’s explanation of why last year looked, at least on paper, like it should have created better conditions for active managers.
She pointed to greater dispersion, or cross-sectional volatility, as one potential tailwind. When the spread between winners and losers widens, a skilled stock picker should theoretically have more room to add value. We saw some of that, especially after the tariff-related turmoil, as the market tried to distinguish between likely winners and losers of changing policy dynamics.
There were also moments when the market broadened out in a way that could have helped managers who were underweight the largest mega-cap stocks. The contribution of the top stocks in the S&P 500 declined over the course of the year, and the equal-weight version of the index outperformed early on.
But in the end, those tailwinds were not enough. The broad market leadership still proved difficult for active managers to navigate, and what may have looked like a better setup for stock picking did not translate into better results.
That is one of the reasons I think SPIVA is so useful. It helps separate the stories investors tell themselves from the outcomes the data actually shows.
Over The Long Run, Beating The Index Gets Even Harder (7:43)
As interesting as the one-year results are, I think the longer-term data is where SPIVA becomes most powerful.
Anu and I talked about how much noise there is in short-term market outcomes. A one-year period can reflect any number of temporary trends, sentiment swings, or unusual conditions. But once you stretch the data out across longer horizons, the findings become much more stable—and much more difficult for active management to defend.
When you look at the three-year, five-year, ten-year, fifteen-year, and twenty-year results across domestic equity categories, the percentages of managers underperforming their benchmarks are consistently high. In many categories, more than 90% of managers fail to beat the index over those longer periods.
That stability matters. It tells us this is not just a story about one bad year for active managers. It is evidence of a structural challenge.
Why So Many Active Managers Fail To Beat The Market Over Time (8:34)
I asked Anu directly why so many managers fail to beat the index over the long term, and her answer touched on several of the most important truths in investing.
The first was cost. SPIVA reports performance net of fees, and index funds have long had a cost advantage. That alone creates a meaningful hurdle for active managers. S&P Dow Jones Indices estimates that investors using indexed products tied to the S&P 500, S&P 400, and S&P 600 saved roughly $52 billion in fees last year compared with active alternatives. And that figure likely understates the full amount of savings across the broader industry.
The second reason was one I think is underappreciated by many individual investors: the positive skewness of stock returns. Stock market returns are not normally distributed in a neat bell curve. A relatively small number of big winners drive a disproportionate share of long-term wealth creation. That means concentrated portfolios face a very real risk of missing the handful of stocks that matter most.
The third reason is competition. Markets have become more professionalized, more institutionalized, and more efficient over time. There are more smart people, more data, more technology, and more capital competing to exploit the same opportunities. That makes sustained outperformance much harder to achieve.
All of that reinforces a point I often make to investors: a lot of investment success comes not from finding brilliance, but from avoiding unnecessary mistakes.
The Persistence Problem: Why Finding Winning Managers Is Even Harder Than It Sounds (14:03)
One of the most common pushbacks to SPIVA is simple: if some managers outperform, why not just invest with those managers?
That question leads directly into the Persistence Scorecard, which I think is one of the most valuable companion pieces to the SPIVA research.
Anu explained that while outperformers certainly exist, identifying them ahead of time is extremely difficult because performance tends not to persist. Managers who outperform in one period are often not the same managers outperforming in the next.
That is a major point. Beating the market is difficult. Finding the managers who will continue to do it is harder still.
The persistence data underscores this. In prior research, only 2% of large-cap equity funds stayed in the top half of their peer group over a five-year period, and none of the top-quartile funds remained in the top quartile across five consecutive years. That finding is consistent with S&P Dow Jones Indices’ broader persistence research, which shows that top-ranked funds rarely remain top-ranked over time.
That does not mean every case of outperformance is luck. But it does mean investors should be very careful about assuming past winners are especially likely to remain future winners.
What SPIVA And Persistence Really Teach Investors (18:57)
I asked Anu what she hopes investors and advisors actually do with SPIVA and the Persistence Scorecard.
Her answer was that these reports are tools—tools for education, transparency, and better decision-making.
That really resonates with me. SPIVA is not useful only because it shows active managers struggle. It is useful because it helps investors ask better questions. Which categories have been more difficult for active managers? Where have the odds of outperformance been especially poor? Which areas of the market have looked more competitive? How often do winners stay winners?
Used the right way, the scorecards can improve investor behavior. They can help people move away from performance chasing, manager hopping, and overconfidence in their ability to identify skill in advance.
Why The Active-vs.-Passive Debate Is More Nuanced Than It Used To Be (20:21)
From there, I took the conversation in a more abstract direction.
I shared something I have been thinking about a lot: I am not sure active versus passive is even the right debate anymore. In many ways, I think the more relevant distinctions are between low-cost and high-cost, rules-based and prediction-based, systematic and discretionary.
Anu agreed that the line between active and passive has blurred. She described it as more of a continuum than a binary choice.
That is a framework I like. If you picture active and passive as two circles in a Venn diagram, there is now a growing overlap between them. Investors can use passive tools in highly active ways. They can trade sectors tactically, rotate exposures, or build more customized portfolios with index-based products. On the other hand, many so-called active approaches are highly systematic and rules-driven, even if they are not traditional market-cap-weighted index funds.
That is one reason I increasingly think “indexing” does not necessarily mean “passive” in the way many people assume.
How Index-Based Products Are Being Used Much More Actively Than Many Investors Realize (21:38)
Anu brought up one of the more interesting findings from S&P Dow Jones Indices’ research on liquidity and trading activity: index-based products are increasingly being used by a wide variety of market participants in different ways.
Some investors are long-term buy-and-hold allocators. Others are tactical traders moving in and out of sectors or themes. Still others land somewhere in between.
That range of use cases is part of what makes today’s indexing ecosystem so fascinating. What began as a measurement tool has evolved into a flexible set of building blocks that can be used for benchmarking, asset allocation, tactical positioning, price discovery, and risk management.
In other words, the same product structure can serve very different objectives depending on who is using it and how.
Why Index Methodology Matters More Than Many Investors Realize (26:02)
One part of the conversation I especially enjoyed was discussing what investors should consider when choosing among funds that all appear, at first glance, to offer similar exposure.
Anu emphasized that index methodology matters—a lot.
If two funds both say they offer value exposure, for example, that does not mean they define value the same way. Different index providers may use different metrics, different screening rules, different rebalancing schedules, and different inclusion criteria. Those choices can lead to meaningfully different portfolios and outcomes.
That is something I learned firsthand years ago when I was rebuilding capital market assumptions and realized just how different seemingly comparable indexes could be. Even within the same market segment, the underlying rules matter.
Investors evaluating index-based products should understand what metrics an index is measuring, how often it rebalances, how constituents are added or removed, what liquidity screens are used, and how the resulting portfolio behaves over time. Transparency is one of the biggest advantages indexing offers—but only if investors take the time to actually look under the hood.
What Fixed Income SPIVA Data Says About Bond Managers (31:04)
Toward the end of the conversation, I took us into fixed income—one of my favorite topics and an area where the indexing conversation often gets overlooked.
Anu explained that evaluating active management in bonds requires a different framework than in equities. In fixed income, managers can potentially add value through duration positioning, credit tilts, and exposure to less liquid bonds.
When S&P analyzed the market environment through that lens, the results suggested that last year offered only moderately encouraging conditions for active fixed income managers. Longer duration could have helped in some cases, and there were pockets where taking more credit risk was beneficial, but illiquidity was not much of a tailwind.
Overall, the fixed income SPIVA results were still challenging across many categories, including investment grade, government, and high yield. One relative bright spot was emerging market debt, where a weakening U.S. dollar offered a meaningful tailwind.
That is an area I think deserves much more attention from investors, especially because fixed income indexing has evolved so much in recent years.
How S&P Is Thinking About Private Markets And Retail Access (33:52)
I closed by asking Anu about another growing area of investor interest: private markets.
There has clearly been an explosion in retail interest and product development around private credit and other private market exposures, even if the data remains less standardized and less transparent than what public market investors are used to.
Anu noted that S&P does have index coverage in this area, including an index tied to publicly traded business development companies, or BDCs. That kind of benchmark can help investors think more clearly about diversification, exposure, and structure in a part of the market that often feels much murkier.
And in a market environment where idiosyncratic risk is rising and sector-level divergence is increasing, that kind of index-based perspective may be more useful than ever.
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