MW These stock pickers just had their worst month of 2025 at trying to beat benchmarks

By Christine Idzelis

After a 'weak' July for active large-cap equity mutual funds, a majority are underperforming their benchmarks this year, according to BofA

Persistently beating passive funds is tough for stock pickers.

Professional stock pickers who actively run mutual funds that are focused on U.S. large-cap equities just had their worst month of the year when it comes to beating their benchmarks, according to BofA Global Research.

Just 31% of active large-cap equity funds outperformed in July, BofA strategists said in a note Wednesday. Their "weak" performance last month brought their year-to-date "hit rate" down to 43%, from 53% in June, they wrote.

The findings are the latest evidence of how tough it is for professional stock-pickers to persistently beat their benchmarks. Still, many investors are willing to pay more in fees for actively managed funds, as they hope their managers will provide market-beating returns.

The BofA chart below shows how active large-cap equities managers stacked up in July against their Russell 1000 benchmarks, including core, growth and value investing styles. "Growth funds were the biggest laggard," the BofA strategists found.

BOFA GLOBAL RESEARCH

Funds that passively track broad equity-market indexes are relatively cheap.

For example, the Vanguard Russell 1000 ETF VONE, an equities exchange-traded fund that tracks the Russell 1000 index to provide investors broad exposure to large U.S. companies, has gained 7.8% this year through Wednesday. The ETF has a low expense ratio of 0.07%.

As for the other investment styles that track the performance of Russell 1000 indexes, the iShares Russell 1000 Growth ETF IWF has rallied 10.3% this year through Wednesday, while the iShares Russell 1000 Value ETF IWD has risen 5.1%, according to FactSet data. Each of those passive ETFs have an expense ratio of 0.18%.

It's been a long time since a majority of large-cap funds finished a year beating their Russell benchmarks, the BofA note shows. The chart below indicates the last time that happened was in 2007, and that historically just 37% outperformed annually on average.

BOFA GLOBAL RESEARCH

"Headlines about active managers' superiority in navigating turbulence often decorate market declines," said Bryan Armour, Morningstar's director of ETF and passive-strategies research for North America, in an Aug. 5 note. "The data rarely backs this up - at least for the average active manager."

Recent volatility didn't seem to help most active managers, according to Armour, who looked at a universe of 3,200 active funds.

"Just one in three active managers survived and outperformed their average peer over the 12 months through June 2025," he said.

The U.S. stock market closed higher Wednesday, with the S&P 500 SPX gaining 0.7%, the Dow Jones Industrial Average DJIA rising 0.2% and the Nasdaq Composite COMP climbing a sharp 1.2%.

-Christine Idzelis

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August 06, 2025 17:44 ET (21:44 GMT)

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