MarketGrader Indexes vs. Active Managers: 2025 Performance Review

Following the publication of our 2025 benchmark report card summary, we now turn to the second component of our annual review: performance relative to actively managed peers, based on Morningstar category data as of December 31, 2025.

Download our 2025 Report Card vs. Active Managers

Across our three primary geographic segments, MarketGrader Indexes delivered competitive and, in many cases, top-tier relative outcomes. In the United States, our Core indexes ranked in the 18th percentile on average over one year and in the 6th percentile over five years. U.S. Style indexes ranked in the 13th percentile on average for one year and likewise had a very strong showing over five years, where they ranked, on average, in the 6th percentile.

In Developed Markets, Single Country and Regional strategies ranked in the 29th percentile on average over one year and in the 12th percentile over five years. In Emerging Markets, Core strategies ranked in the 71st percentile in 2025 but look sharply better over five years, where they rank, on average, in the 2nd percentile. Emerging Markets Single Country strategies ranked in the 43rd percentile over one year and in the 2nd percentile over five years.

All comparisons below are based on Morningstar category classifications and total returns in USD, unless otherwise indicated in the tables. Index returns do not reflect management fees or trading costs, while actively managed funds included in Morningstar peer categories are reported net of fees. Percentile rankings are shown relative to the number of managers in each Morningstar category.

United States

In the U.S., MarketGrader Indexes demonstrated strong relative performance across the board, with standout performances in the large cap core and value categories. Figure 1 presents the five highest-ranking U.S. indexes for 2025 based on one-year Morningstar peer group percentile ranks.

Figure 1. Top 5 U.S. Indexes vs. Active Managers (1-Year, 2025)

These results were achieved in peer groups containing between 319 and 407 managers. They also align with the broader pattern captured in our averages: Core and Style strategies ranked within the top quintile on average over one year and moved into the top decile on average over five years.

Developed Markets

Developed Markets Single Country and Regional strategies ranked in the 29th percentile on average for 2025 and improved to the 12th percentile over five years.

Performance in Developed Markets during 2025 was influenced in part by global capital allocation trends similar to those observed in Emerging Markets, though with a different composition and intensity. As investors diversified away from U.S.-centric exposures and sought non-US dollar assets, capital flows into developed ex-U.S. markets strengthened. This supported broad market returns across Europe, Canada, and select Asia-Pacific markets, particularly in larger, benchmark-heavy segments.

Unlike Emerging Markets, however, dispersion across developed ex-U.S. equities remained more closely tied to sector and factor exposures than to wholesale benchmark-driven flows. In that environment, disciplined company selection remained an important differentiator. The improvement from a 29th percentile average over one year to a 12th percentile average over five years reflects the persistence of MarketGrader’s bottom-up methodology across diverse international markets.

Figure 2. Top 5 Developed Markets Indexes vs. Active Managers (1-Year, 2025)

This cross-section highlights the breadth of MarketGrader’s Developed Markets results across core, income-oriented, and single-country exposures.

Emerging Markets

Emerging Markets results require additional context. In 2025, emerging markets attracted renewed investor attention as market participants sought diversification away from dollar-denominated assets and from policy uncertainty in the United States. This shift in allocation preferences generated significant capital flows into Emerging Markets vehicles, often with limited discrimination across underlying holdings. As a result, broad benchmark exposures benefited meaningfully from flow-driven momentum during the year.

In such environments, asset allocation decisions can exert a stronger influence on short-term performance than underlying company fundamentals. Broad-based buying across benchmark constituents may compress performance dispersion and reduce the relative impact of bottom-up security selection. This dynamic contributed to the more mixed one-year relative rankings observed among MarketGrader’s EM Core strategies, which ranked in the 71st percentile on average for 2025, while EM Single Country strategies ranked in the 43rd percentile. MarketGrader’s rankings across broad emerging markets improve considerably when measured over five years, with Core and Single Country exposures ranking in the 1^st and 2^nd percentiles, respectively, underscoring the strength of disciplined company selection when assessed across full market cycles rather than shorter-term flow-driven environments.

It is also important to recognize that definitions of Emerging Markets vary meaningfully across index providers and active managers. MarketGrader excludes South Korea and Taiwan from most of its Emerging Markets indexes, as we classify those economies as developed. Many active managers, however, include significant allocations to those markets within EM portfolios. In periods when Korea and Taiwan outperform, these classification differences can materially affect relative comparisons. To accommodate differing classification frameworks, MarketGrader offers the Emerging Markets Plus (+) Index, which mirrors the designation of South Korea and Taiwan as emerging economies.

Figure 3 presents the five strongest Emerging Markets performers for 2025 based on one-year Morningstar peer group percentile ranks.

Figure 3. Top 5 Emerging Markets Indexes vs. Active Managers (1-Year, 2025)

Long-Term Perspective: Five-Year Leaders

Short-term performance can be influenced by capital flows, benchmark composition, and shifting macro preferences. Over longer horizons, however, relative results more clearly reflect the cumulative impact of company selection discipline. Across the United States, Developed Markets, and Emerging Markets, five-year percentile rankings improve meaningfully and cluster in the top decile of their respective Morningstar peer groups. Figures 4, 5, and 6 below highlight the five strongest five-year performers in each region, illustrating the persistence of MarketGrader’s ‘GARP + Quality’ framework across diverse markets and competitive peer universes.

United States – Five-Year Leaders

Figure 4. Top 5 U.S. Indexes vs. Active Managers (5-Year)

Developed Markets – Five-Year Leaders

Figure 5. Top 5 Developed Markets Indexes vs. Active Managers (5-Year)

Emerging Markets – Five-Year Leaders

Figure 6. Top 5 Emerging Markets Indexes vs. Active Managers (5-Year)

Conclusion

The 2025 comparison of MarketGrader indexes versus actively managed peers reinforces a clear and measurable pattern. While short-term relative outcomes vary across regions and categories, longer-term results demonstrate consistent and statistically meaningful strength.

Five-year average percentile rankings of 6% for U.S. Core and Style strategies, 12% for Developed Markets Single Country and Regional strategies, and 2% for Emerging Markets Core and Single Country strategies indicate that relative performance improves as the evaluation horizon extends. Across highly competitive Morningstar categories, numerous MarketGrader indexes rank within the top decile—and frequently within the top 1% to 2%—of their peer groups.

These results are not driven by tactical positioning or episodic market conditions. They reflect the differentiating role of systematic company selection grounded in our MarketGrader’s rigorous fundamental analysis, applied daily across virtually all publicly traded companies in the world. By emphasizing sustainable growth, valuation discipline, profitability, and cash flow, the methodology seeks to generate durable relative advantages that become increasingly evident over full market cycles.

For investors evaluating systematic alternatives to traditional active management, the data suggests that disciplined, fundamentals-based index construction can deliver durable and competitive outcomes across regions and time horizons.