Its half-yearly 'European Active/Passive Barometer' revealed low success rates for active managers.

On average, only 35% of active funds in the 43 equity categories analysed survived and outperformed their passive peers in the year to June.

Only seven equity categories showed a rate of success for active managers above 50% in the period, said Morningstar.

The average rate of success for active fixed-income managers in the 23 categories analysed was slightly higher at 40% in the 12 months to the end of June 2022. 

It pointed out that financial markets in the first half of 2022 faced myriad headwinds, most notably significant tensions in energy markets in the wake of the Russian invasion of Ukraine.

That exacerbated the rising inflationary pressures that had started to build up in late 2021 as the world's economy struggled with the inability of previously dormant supply chains to meet the strong increase in demand of countries coming out of lockdown.

With major central banks changing policy gear and starting to hike interest rates, it made for very challenging conditions for equity and bond markets, which experienced significant falls over the period.

But it was the type of environment where active managers could have been expected to beat passive peers more easily, as these typically incorporate the full downside in market valuations, Morningstar said.

However, the rate of success of active managers in EAA categories in the one-year period to the end of June 2022 failed to impress, it concluded.

Long-term success rates for active managers remained low overall, according to the company. It said the average rate of success for active equity managers over the past decade was 24%, while the average rate of success for fixed-income active managers was 21%.

Dimitar Boyadzhiev, senior manager research analyst, passive strategies, said: “Our Active/Passive Barometer is a useful measuring stick that can help investors calibrate the odds of succeeding with active funds in different areas based on recent trends and longer-term history.

“Comparing funds’ mortality rates between active and passive shows that the latter have had better odds of surviving over the long term. The contrast is starkest over longer periods.”