Morningstar has released its latest Active/Passive Barometer, a semi-annual report that measures the performance of US active funds against passive peers, such as ETFs, in respective Morningstar categories. The key takeaway from the report is that the average dollar invested in passive funds typically outperforms the average dollar invested in active funds.

The research shows just 14.6% of active funds in the US large-cap category outperformed their passive equivalents over the past 10 years.

The research evaluates active funds not versus a costless index but against a composite of actual passive funds. This way, the benchmark used reflects the actual net-of-fees performance of passive funds. On this basis, actively managed funds have generally failed to survive and beat their composite passive benchmarks, especially over longer time horizons.

The research also provides further evidence on the damaging effect of higher fees over longer time horizons. For example, 21.4% of US large-cap active funds with the lowest costs outperformed passive funds over the past ten years. For active funds in the same category with the highest costs, that figure drops to just 8.6%.

Ben Johnson, director of global ETF research, Morningstar, commented: “Investors would greatly improve their odds of success by favouring low-cost funds, which succeeded far more often than high-cost funds over the long term”.

Active funds in the US large-cap category were the worst performers. “Less than half of the actively managed funds in this category 15 years ago survived and just 7.1% managed to both survive and outperform their average passively managed peer,” said Johnson.

While still generally well below 50%, outperformance rates were highest for active funds in the small-cap, emerging markets, non-US equity and intermediate-term bond categories.

However, in a damning verdict for high-cost funds, out of the 12 categories included in the Morningstar report, there was only one category where the success rate of the highest cost funds was better than that of the lowest cost funds in the same category.

The report also details the recent success of actively-managed funds. Around 49% of active US stock funds beat their composite passive benchmark in the 12-month period to 30 June 2017, compared to just 26% for the year ended 31 December 2016.