Can Passive Investing Really Outperform Active Managers and Hedge Funds - The Daily Scroll

Is passiveinvestingreally a better deal for investors than activeinvesting?This was no ordinary wager. Buffett bet Protégé Partners, an asset manager, $1 million that a passivelymanaged index fund would outperform a collection of hedgefunds over the course of the next decade. What Is ‘ActiveInvesting,’ Really? Activeinvesting means investing in funds whose portfolio managers select investments based on an independent assessment of their worth—essentially, trying to choose the most attractive investments. Generally speaking, the goal of active... passiveinvesting tends to outperformactive trading. Yes, chasing performance into passivefunds and back out to activefunds does hurt performance.What is active versus passive index fundinvesting? What does that mean? While activeinvestment still outpaces passive overall, indexing has made significant gains in the past decade or so. As of year-end 2016, approximately $9.5 trillion was invested in active strategies, while $5.4 trillion was invested in passive strategies, according to data from Morningstar. US activelymanaged mutual funds and ETFs struggled to outperform their average passive peer in 2025. Many activelymanagedfunds now offer lower fees. The debate between passive and activefundmanagement is one of the great investing controversies. Passive index fundinvesting seems to be winning the competition. PassiveInvesting: Activeinvesting, as the name suggests, is a hands-on approach and necessitates that a portfolio manager be present.