Past performance is no guarantee of future results, data confirms 📊
Top fund managers rarely stay on top 📉
It’s hard enough to construct and manage a stock portfolio in a way that beats the competition.
Even if you are a fund manager who generated industry-leading returns in one year, history says it’s unlikely you’ll stay on top consistently in subsequent years.
S&P Dow Jones Indices (SPDJI) just published its latest Persistence Scorecard, which tracks the performance of actively managed funds over the five years ending 2025.
Of the 334 large-cap equity funds in the top half of performance in 2021, 58.7% remained at the top half in 2022. However, just 6.9% remained on top through 2023. Only 4.5% stayed on top in the five consecutive years through 2025. (See the chart above.)
It’s much more dismal when you raise the bar. Of the 164 large-cap equity funds in the top quartile in 2021, just 20.1% remained in that category in 2022. That percentage fell to literally 0.0% in 2023.
“Active management is challenging,” SPDJI analysts wrote. “But identifying outstanding managers can be equally, if not more, challenging. The Persistence Scorecard shows that consistent outperformance is typically fleeting.“
The results were a little better in recent years 🔎
The past three years were a bit better than the five-year results we reviewed above.
For example, 338 large-cap equity funds were in the top half of performance in 2023. Of those funds, 82.0% came in the top half again in 2024. And a respectable 49.4% extended that streak through 2025.
Even with the bar set higher, of the 173 large-cap equity funds in the top quartile in 2023, 75.7% remained on top in 2024, and 28.9% remained there through 2025.
But anyway you slice it, the data suggest the odds are against you that you’ll pick the fund manager that delivers top-performing returns over periods greater than two years.
As fund-management companies always caution in their disclaimers, past performance is no guarantee of future results.
This data is the latest reminder of how hard it is to pick winning stocks that’ll help you outperform. It's in line with data showing how difficult it is to beat benchmarks like the S&P 500, which itself sees lots of turnover in its constituents. For most investors, the smartest move has been to just park in an index fund where “consistent average returns turn into above-average returns over time.”
-
Related from TKer: