In the continuing debate over passive versus active mutual funds, there is growing evidence that passive beats active over the long-term, especially among large-cap equity funds, but that doesn't mean that selective actively managed funds can't outperform in the short term or long term.
A recent Morningstar report highlighted 10 actively managed large-cap equity funds that beat the S&P 500 over a 15-year period, from January 2002 through December 2016.
Karen Wallace, a senior editor at Morningstar, noted that inclusion in the list doesn't necessarily mean these funds will continue to outperform the S&P 500 but each of the 15 has been named a Morningstar medalist — gold, silver or bronze — which indicates that the fund rating agency expects they will outperform over a full market cycle of five years or longer.
All 15 funds are relatively low-cost, based on their current expense ratios. Half charge fees in the lowest quartile of U.S. large-cap funds and half place in the second lowest quartile. Only one fund – Amana Income Investor (AMANX) — had an expense ratio that topped 1%, at 1.14%. The cheapest fund was Vanguard Primecap (VPMCX), with an expense ratio of 0.39%. Referring to research by Morningstar analysts, Wallace notes that "success for active funds is much improved when their cost hurdles are reasonable."
It should be noted that two of the funds, Vanguard Primecap and American Century Equity Income (TWEIX), are closed to new investors. Five of the funds are categorized as large-cap blend; three as large-cap value and two as large-cap growth.
