Copy article

Active funds or trackers? What's best?

ended 20. April 2026

What's your view on the whole tracker versus active debate? Are people better off sticking with trackers or do active funds, if you know the right ones, still deserve a look in? Any research or intel you have on trackers v passive, send that across, it's all helpful.

8 responses from the Newspage community

Copy all

Star Quote
Copy

Editor
Martin Rayner
Financial Adviser at Compton Financial Services
The data on this is hard to ignore. S&P’s SPIVA research shows, for example, tha in Europe, just under 3% of active funds outperform the S&P Europe 350 over 10 years — yet investors are typically paying higher fees for them. For most clients focused on long-term growth, particularly pensions, the priority is consistent returns with sensible costs. That’s why tracker funds make a strong case as the core of a portfolio. But it’s not just active versus passive. Many tracker portfolios are relatively static and only rebalanced periodically. There’s a strong case to consider a middle ground with Tactical Asset Allocation Trackers — using low-cost trackers but allowing for tactical shifts between regions based on the economic outlook to generate higher potential returns over a standard tracker. Active funds can still play a role in more specialist areas, but for many investors, approaches that combine low-cost tracking with some tactical flexibility may increasingly be the starting point.
Star Quote
Copy

Editor
Eamonn Prendergast
Chartered Financial Adviser at Palantir Financial Planning Ltd
For years, active managers argued that higher fees were the price of expertise. The problem is that the numbers increasingly tell a different story. Evidence continues to favour passive investing. SPIVA (S&P indices versus active) a market leader in research between active and passive funds have repeatedly shown that the majority of active managers underperform their benchmark over meaningful time periods, before you even consider how difficult it is to identify the minority that will outperform in advance. Once higher fees are factored in, the hurdle for active funds becomes even harder to clear. Investors are too often paying active charges for benchmark-like, or worse, below-benchmark returns. In most mainstream markets, passive funds offer a more efficient solution: lower costs, greater transparency and a higher probability of delivering a better net outcome over the long term.
Copy

Editor
Rob Mansfield
Independent Financial Advisor at Rootes Wealth Management
Active funds have to earn their fees and there are lots that don't. That's not to say that all active funds are bad though. For 'buy and forget' type savings, passive funds have had a great run because money has concentrated into the largest companies, pushing up their share prices. Following that has been profitable. For certain stages in life, performance isn't the only consideration. You might want a fund to generate a income yield in retirement or to try and focus more on capital preservation. Here, a well run active fund can have an edge.
Copy

Editor
Graham Nicoll
Financial Planner, Chartered FCSI at NCL Wealth Partners
Advisors often fall into the camp of being a believer in tracker (market return) investing or active investing, although it is not always as binary as this.  

Tracker funds simply follow markets like the FTSE 100, offering low-cost, transparent returns that reliably match overall market performance. Active funds aim to beat the market through stock selection, but higher fees and inconsistent results mean many fail to outperform over time.  There are also Smoothed funds, often used in pensions, reduce visible volatility by averaging returns, though this can mask risks and dampen long-term growth. 

In practice, trackers are widely seen as the most dependable core holding, while active funds can add value selectively and smoothed funds appeal mainly to more cautious or near-retirement investors. The key trade-off is between cost, consistency, and comfort where trackers maximise efficiency, active funds chase outperformance, and smoothed funds prioritise stability.
Copy

Editor
Paul Denley
CEO at Oakham Wealth Management
Passive investing seems sensible, until you examine what you're actually buying. The most popular equity indices are heavily concentrated: the S&P 500's top 10 stocks reached a record 40% of the index in 2025, and the MSCI World Index is around 70% invested in the US.
When you invested in the MSCI World ETF, did you intend to actively allocate to US tech? Buying a tracker is often not a passive decision - it can be an active decision to overweight specific sectors or stocks.
Active management earns its place where markets are inefficient or distorted - there is a stronger case for it in small companies than large. Targeted passive strategies such as factor and equal weighted ETFs can offer a middle ground, challenging market cap orthodoxy without the full fees of active management.
Passive gives you the river, active can plot a course through the rapids.
The real question isn't active vs passive, it's where each belongs. Pay for skill where it matters - commoditise what doesn't.
Copy

Editor
Antonia Medlicott
Founder & MD at Investing Insiders
There is a growing weight of evidence in favour of trackers which is directly leading to the surge in popularity for people seeking strong returns coupled with low costs. Conversely, over the long term, most active funds fail to beat their benchmark once fees are included.

Strong returns from large US companies have also been hard to outperform for active managers.

If you can get market-level returns for a lower cost, is it worth paying extra for the chance of underperformance? Unless you are one of the few benefiting from them, or can confidently say you know which assets provide better value or future opportunities, the answer is probably not.

That said, active funds are far from redundant. There is still value to be had in less efficient areas of the market, but the challenge is selecting the winners in advance. For the majority of investors, trackers are likely to be the more reliable and often easier starting point, with active funds used selectively rather than by default.
Copy

Premium
Adam Pickett
Independent Financial Adviser at McLaren Capital
There is definitely a place for active fund management over passive. Passive funds have outperformed active over the last decade for a simple reason - the US has been the best performing region, and even more so, the biggest US companies (known as 'Mega-Cap') have performed the best within this region. The consequence is that these companies, which have driven almost all of the passive performance, now account for a staggering share of most passive equity strategies (the top 7 stocks make up 19%, and the US makes up 63-65% of the global index tracker). There is an enormous risk that should anything impact their future growth potential (perhaps, a fundamental shift in the cost of energy, for example), these companies will underperform, and will drag most indices with it. There is an assumption that stock markets always go up, but in the 70s, the US stock market peaked in 73 and didn't return until the 80s, and in the 80s Japan peaked and didn't return until the 2020s. Eggs in basket!
Copy

Jordan Reid
Chartered Financial Planner at Serenity Financial Planning
While active management can offer flexibility, it often comes with higher costs and the risk that a manager will make the wrong call.

By contrast, a tracker investment strategy offers simplicity, lower costs and broad diversification to capture market returns while avoiding "manager risk".

There is a “halfway house” between active investing and tracker funds.

We use "factor-tilting"—a quantitative approach based on decades of academic research—to target specific characteristics within investments like "Value" or "Quality" that have historically delivered improved outcomes.

You get all the benefits of a tracker fund but with the longer-term potential to outperform.

You can also reduce risk. An example is the over-concentration in a few massive tech stocks. A simple S&P 500 tracker is likely to see around 33% of your money invested in just seven companies. Our factor tilting reduces this exposure down to more like 11%, which is useful in case the AI bubble pops.