Investors hoping for a resurgence of active managers will have to keep waiting, as active managers have generally underperformed in the first half of 2026, according to AJ Bell’s latest Manager vs Machine report.
In the first half of 2026, just 42% of active funds have beaten their average passive counterpart, roughly matching their performance in the same period last year.
As a result, long-term results continue to favour passive funds, with just 17% of actives beating a tracker over the past five years, and just 21% over the decade.
Dan Coatsworth, head of markets at AJ Bell, said: “We’ve had yet another six-month period where a large chunk of professional stockpickers failed to deliver the outperformance they’re being paid to do.”
It was a particularly poor showing for UK, European and global fund managers.
Starting with global, just 22% of active funds beat passive peers, their second-worst performance in the report since it was set up in 2021.
See also: LSEG Lipper: Net flows spike in April as investors pour into passive funds
“Fund managers with a global equity remit have a vast universe from which to find the best opportunities,” Coatsworth said. “Sadly, it looks like many were fishing in the wrong places.”
Some active funds could make it work. For example, the best-performing global fund in the first half of 2026 was active (Polar Capital Artificial Intelligence), according to FE fundinfo data.
But for the rest, this data was a “huge embarrassment for the active fund management industry”, Coatsworth said.
As a result of this general underperformance, passive funds accounted for two-thirds of the top 100 most popular funds between January and June 2026, according to AJ Bell DIY investor activity.
Part of the problem for active managers in the short and long term is the high concentration in tech stocks in global indices, which most active managers are underexposed to, Coatsworth explained.
Things do not get much better in the rest of the West. Just 19% of UK funds beat their passive peers in the first half of the year, creeping up to 32% in Europe and 42% in the US, all record low levels of outperformance according to the report.
“What worked in 2025 didn’t repeat itself entirely in the first half of 2026, with previously strong areas like gold mining, defence, and pharma/biotechnology losing momentum,” Coatsworth noted.
For example, in the UK FTSE 250, precious metals and mining stocks were the standout of 2025, up 251%. In the first half of this year, they have lost 11%, according to AJ Bell data.
Coatsworth said: “Active managers might have been caught out by the rotation and didn’t move fast enough, or they were simply parked in the wrong sectors to beat their passive counterparts,
“This doesn’t bode well for the reputation of active management.”
He conceded that investors might point to recent Investment Association data, which demonstrated positive retail sales of active funds in the first five months of 2025.
See also: IA: Inflows jump to £2.4bn as active funds beat trackers
But at the same time, many of the most popular active funds on AJ Bell’s platform this year had passive tilts, such as AJ Bell’s own multi-asset funds or the Vanguard LifeStrategy series.
Meanwhile, two of the biggest net sales in the first half of 2026 were former ‘star managers’; Fundsmith Equity and Lindsell Train UK Equity.
“Investors are abandoning them after a long period of underperformance, effectively turning off the lights for the last remaining star managers in the UK,” Coatsworth said.
However, it’s not all doom and gloom for active fund managers in the manager vs machine report.
Asia Pacific ex-Japan active funds had their best period since the report started, with 65% beating their passive counterparts. Global emerging market funds were just barely behind, with 63% beating passives.
“Their success was helped by a market rotation from the US mega-cap tech stocks spending big money on AI (ie most of the magnificent seven) to beneficiaries of this spend,” Coatsworth said.
Memory chips were easily the biggest winner, with names such as SK Hynix up 300% in the first half of 2026, pushing the stock to nearly 8% of the MSCI Emerging Markets and MSCI AC Asia Pacific ex-Japan index.
“This result is why certain investors continue to put their faith in active management,” Coatsworth said.
Active Japanese funds also barely edged out passives, with 52% of active funds outperforming.
See also: Finscape: Active funds trounce passives in May as geopolitics bubbled
