Competing with Active Management: How MarketGrader Indexes Ranked Against Professional Stock Pickers

In our previous article, we examined how MarketGrader’s indexes performed relative to their benchmark indexes during the second quarter and over longer investment horizons. While benchmark-relative performance remains an important measure of success, institutional investors, financial advisors, and asset managers often ask a different question: How do MarketGrader’s indexes compare with actively managed investment strategies?

To answer that question, we evaluated our indexes against Morningstar’s extensive universe of actively managed mutual funds and ETFs. Each MarketGrader index was assigned to its most appropriate Morningstar category and ranked according to its total return over one-, three-, and five-year periods ended June 30, 2026. Morningstar expresses these rankings as percentile scores, where lower percentiles indicate stronger relative performance. An index ranked in the 10th percentile, for example, outperformed 90% of actively managed strategies within its peer group.

The results suggest that MarketGrader’s disciplined, fundamentally driven investment process has consistently delivered performance comparable to—and often exceeding—that of hundreds of professional portfolio managers across multiple regions and market cycles.

U.S. Core Indexes

MarketGrader’s family of 23 Core U.S. indexes produced particularly strong long-term results. Over the five years ended June 30, 2026, they achieved an average peer-group percentile ranking of just 8%, placing the average MarketGrader Core U.S. index among the top-performing actively managed strategies in its category. Nearly half (48%) ranked within the top 5% of their peer groups, 70% ranked within the top decile, and 96% finished in the top quartile.

The consistency of these results is equally noteworthy. Over the three-year period, the average percentile ranking was 21%, with 39% of the indexes ranking in the top decile and 70% remaining in the top quartile. Even over the most recent twelve months, a period characterized by elevated market concentration and rapidly shifting leadership, our Core U.S. indexes maintained an average percentile ranking of 38% among actively managed peers.

Several indexes delivered particularly exceptional five-year results. The MarketGrader U.S. Large Cap Select 50 Index and MarketGrader U.S. Mid Cap Select 50 Index both ranked in the 2nd percentile within their respective Morningstar categories. The MarketGrader U.S. Large Cap Value Index and MarketGrader U.S. Large Cap Value Select 30 Index, along with both the MarketGrader U.S. Income 100 and MarketGrader U.S. Income 50 Indexes, ranked in the 1st percentile, outperforming virtually every actively managed strategy in their peer groups. Other standout performers include the MarketGrader U.S. Alpha Core, MarketGrader U.S. Large Cap 200, MarketGrader U.S. Mid Cap Core 100, and MarketGrader U.S. All-Cap Core 65 Indexes, all of which finished within the top decile over the last five years.

Developed Markets

MarketGrader’s Developed Markets index family produced equally impressive results. During the twelve months ended June 30, 2026, the average peer-group percentile ranking was 19%, while 23% of the indexes ranked within the top 5% of their categories, 41% finished in the top decile, and 82% ranked within the top quartile.

The longer-term results are even more compelling. Over the three-year period, the average percentile ranking improved to 10%, with 68% of the indexes ranking within the top 5%, 68% in the top decile, and 86% in the top quartile. Over five years, the average percentile ranking improved further to just 5%, while 73% of the indexes ranked within the top 5%, 86% finished in the top decile, and 95% ranked in the top quartile. The progression illustrates a defining characteristic of MarketGrader’s methodology: its advantages become increasingly evident as investment horizons lengthen.

The breadth of top-ranked strategies is equally striking. The MarketGrader Europe 100, MarketGrader U.K. Large Cap 50, MarketGrader U.K. Small Cap 100, MarketGrader Japan Large Cap 100, MarketGrader Canada Small Cap 60, and MarketGrader Developed Markets (ex-U.S.) Income 100 Indexes all ranked in either the 1st or 3rd percentile over the last five years, while several additional indexes, including MarketGrader Australia Large Cap 30, MarketGrader Israel Large Cap 30, and MarketGrader Canada Large Cap 40, also ranked comfortably within the top decile of their respective peer groups.

Emerging Markets

Emerging Markets have experienced significant country rotation and changing leadership over the last several years, creating a particularly challenging environment for active managers. Even so, MarketGrader’s Emerging Markets indexes have demonstrated strong long-term competitiveness.

Although the group’s average one-year percentile ranking was 53%, reflecting the dispersion that characterized emerging markets during the past twelve months, performance improved meaningfully over longer horizons. The average three-year percentile ranking improved to 38%, before strengthening further to 12% over the five-year period. By June 30, 2026, 58% of the indexes ranked within the top 5% of their categories, 68% ranked within the top decile, and 84% finished in the top quartile over the five-year period.

Among the strongest long-term performers were the MarketGrader Emerging Markets (+ Korea & Taiwan) Index, which ranked in the 5th percentile, the MarketGrader China Large Cap 100 Index in the 1st percentile, and the MarketGrader India Large Cap 50 and MarketGrader India Growth Leaders 50 Indexes, which ranked in the 2nd and 6th percentiles, respectively. These results demonstrate that disciplined company selection can produce consistently competitive outcomes across a diverse range of emerging market opportunities.

A Consistent Pattern Across Global Markets

The most important conclusion extends beyond any single region.

Across all 84 MarketGrader indexes evaluated worldwide, the average peer-group percentile ranking improved from 40% over the last year to 30% over three years and just 12% over five years. By the end of the five-year period, nearly half (49%) of all MarketGrader indexes ranked within the top 5% of their respective Morningstar categories, 64% ranked within the top decile, and 86% finished in the top quartile.

These results reinforce a defining characteristic of MarketGrader’s fundamentals-based approach to active equity investing: performance tends to strengthen as investment horizons lengthen. Rather than attempting to capitalize on short-term market trends or tactical positioning, our methodology systematically identifies companies with durable fundamental characteristics that have historically created long-term shareholder value. As those fundamentals become increasingly reflected in market prices across multiple market cycles, the benefits of disciplined, rules-based stock selection become more apparent.

The complete Q2 2026 Active Managers Report Card, including Morningstar rankings for all MarketGrader indexes across one-, three-, and five-year periods, is available here.

For investors, advisors, and asset managers evaluating systematic investment strategies, these findings demonstrate that transparency and rules-based portfolio construction need not come at the expense of active-quality outcomes. Instead, MarketGrader’s indexes continue to show that a disciplined, fundamentals-based investment process can consistently deliver results comparable to—and often better than—those of many professionally managed active investment strategies.