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Expand chart
Data: S&P Dow Jones Indices; Chart: Axios Visuals

Not all investors are trying to beat the market. According to S&P Dow Jones Indices, a record $5.4 trillion was parked in funds that passively track the S&P 500 at the end of 2020.

Why it matters: There’s plenty of data that shows most individual investors, and even professional money managers, can’t beat the S&P 500 by actively managing their stock portfolios.

By the numbers: At the end of 2008 during the financial crisis, there was just $915 billion worth of assets indexed to the S&P 500. The S&P closed at 903 that year.

  • As passive investing has become increasingly popular, assets indexed to the S&P nearly sextupled (+493%) to $5.4 trillion in 2020 as the index itself quadrupled (+316%) to 3,756.
  • About 60% of large-cap equity fund managers underperformed the S&P 500 in 2020, according to a separate report from S&P Dow Jones Indices.
  • This was the 11th straight year that a majority of these professional stock pickers lagged that benchmark.

Yes but: The active fund management business is alive and well.

  • Just over $8 trillion in actively managed funds use the S&P 500 as their benchmark for performance.

State of play: Even the pros who perform well in a given year are rarely able to stay on top.

  • S&P Dow Jones Indices found that of active large-cap equity fund managers in the top-performing half of their peer group in 2016, just 23% remained in the top in 2017. Only 10.5% repeated the feat three years in a row.
  • And just 4.2% of active large-cap equity fund managers were able to stay in the top half for five consecutive years through 2020.

The bottom line: While historical odds favor investors who only aim to match the performance of the S&P 500, the allure of beating the market will continue to have investors wagering trillions.

Editor's note: This post has been corrected to say that the assets indexed to the S&P 500 sextupled and the index itself quadrupled from 2008 to 2020 (not quintupled and tripled).

Go deeper

Dan Primack, author of Pro Rata
Oct 13, 2021 - Economy & Business

Scoop: Arctos raises over $3 billion to buy stakes in pro sports teams

Illustration: Aïda Amer/Axios

Arctos, an upstart private equity firm founded to buy into pro sports teams, has secured over $3 billion in investor commitments, Axios has learned. The firm originally planned to raise between $1 billion and $1.5 billion.

Why it matters: Private equity has become obsessed with pro sports, from American basketball to European soccer to New Zealand rugby. And Arctos leveraged this fervor on the fundraising circuit.

Updated 1 hour ago - World

State Department orders evacuation of U.S. diplomats' families from Ukraine

From left, Under Secretary for Political Affairs Victoria Nuland, Secretary of State Antony Blinken and U.S. Chargés d'Affaires in Ukraine Kristina Kvien during a meeting with Prime Minister of Ukraine Denys Shmyhal in Kyiv. Photo: Yevhen Liubimov/ Ukrinform/Barcroft Media via Getty Images

The State Department will begin evacuating families and non-essential staff from the U.S. Embassy in Kyiv this week, according to a travel advisory published Sunday evening.

Why it matters: The move underscores U.S. fears that a Russian invasion could destabilize Ukraine and threaten embassy's ability to assist Americans.

Perfect storm brewing for extreme politicians

Data: Axios research; Table: Jacque Schrag/Axios

Redistricting and a flood of departing incumbents are paving the way for more extreme candidates in this year's midterm elections.

Driving the news: At least 19 House districts in 12 states are primed to attract such candidates — hard partisans running in strongly partisan districts — according to an Axios analysis of districts as measured by the Cook Political Report's Partisan Voter Index (PVI).