MarketGrader U.S. Core Indexes, Q1 2026 Update: Broad and Persistent Outperformance vs. Active Peers
Carlos Diez
6 min read
MarketGrader continues to deliver strong results relative to actively managed peers across U.S. equities. Complementing our benchmark-based report cards, MarketGrader evaluates index performance against active managers using Morningstar’s peer group rankings. Rather than focusing on short-term outcomes, this analysis emphasizes one-, three-, and five-year rankings through the most recent quarter-end, providing a more meaningful perspective on relative performance.
For U.S. equities, our analysis centers on our 26 Core U.S. Indexes, which span size, style, and income strategies. Despite a challenging first quarter for U.S. equities, these indexes rank, on average, in the 26th percentile for the one-year period ended March 31, 2026, relative to their respective Morningstar peer groups.
This compares favorably to widely followed benchmarks. Over the same period, the S&P 500 ranks in the 34th percentile among 406 active managers in the large cap blend category. Its mid- and small-cap counterparts, the S&P MidCap 400 and the S&P SmallCap 600, each rank in the 40th percentile within their respective categories.
A Stronger Picture Over Longer Horizons
The relative performance of MarketGrader’s U.S. Core Indexes becomes more pronounced over longer time horizons. Over the past three years, our 26 Core U.S. Indexes rank, on average, in the 14th percentile among active peers across their respective categories.
Over a five-year period, MarketGrader’s rankings are particularly compelling. Our 26 U.S. Core Indexes achieved an average percentile rank of 5%, indicating that they have collectively outperformed 95% of actively managed strategies in the U.S.
In contrast, the S&P 500, S&P MidCap 400, and S&P SmallCap 600 rank in the 22nd, 56th, and 66th percentiles, respectively. Among style benchmarks, the Russell 1000 Growth Index ranks in the 10th percentile, while the Russell 1000 Value Index ranks in the 55th percentile over the same period.
Taken together, these results underscore the value of long-term compounding, particularly when driven by disciplined company selection. By consistently identifying companies with durable growth characteristics and sound fundamentals, and doing so at reasonable valuations, MarketGrader’s approach allows relative performance to build steadily over time, creating a widening gap versus actively managed peers.
One-Year Performance: Leaders and Laggards
At the individual index level, MarketGrader’s strongest one-year performers relative to active peers are concentrated among large cap value and large cap core strategies.
The MarketGrader U.S. Large Cap Value Index and the MarketGrader U.S. Large Cap Value Select 30 Index both rank in the top 1% of their peer group, which includes 316 active managers in Morningstar’s large cap value category. They are followed by the MarketGrader U.S. Large Cap 200 Index, the MarketGrader U.S. Large Cap Core Index, and the MarketGrader U.S. Large Cap Select 50 Index, which rank in the 7th, 8th, and 8th percentiles, respectively, among 406 active managers in the large cap blend category.
Further down the ranking, performance was more mixed in the year ending March 31st across certain mid- and small cap strategies, as well as growth-oriented exposures that faced more challenging conditions over the period.
The MarketGrader U.S. Small Cap Core 100 Index (EW) ranked in the 58th percentile within its peer group, followed by the MarketGrader U.S. Mid Cap Core 100 Index (EW) at the 53rd percentile, and the MarketGrader U.S. Small Cap Core 100 Index (MCW) at the 50th percentile. Growth-oriented strategies also lagged, with the MarketGrader U.S. Large Cap Growth Index and the MarketGrader U.S. Large Cap Growth Select 30 Index both ranking in the 44th percentile among large-cap growth peers, which is still nevertheless better than 56% of active managers in the large cap growth category, which included 316 managers.
While these results fall below the broader group average, they remain close to the median across highly competitive peer universes, highlighting the relatively narrow dispersion among managers over a one-year horizon.
Three- and Five-Year Leaders and Laggards
Over longer horizons, the strength and consistency of MarketGrader’s relative performance becomes increasingly evident.
Over the past three years, the distribution of rankings is heavily skewed toward top-tier performance. Twelve of or 26 Core U.S. Indexes rank within the top decile of their respective peer groups, reflecting broad-based outperformance across size and style categories. Notably, only one index ranks below the median, and only marginally so, underscoring the consistency of results even among the lower-ranked strategies.
Several indexes stand out at the very top of the rankings. The MarketGrader U.S. Income 100 Index ranks in the top 1% of its peer group, while the MarketGrader U.S. Large Cap Select 50 Index, the MarketGrader U.S. Small Cap Select 50 Index, and both the MarketGrader U.S. Large Cap Value Index and Large Cap Value Select 30 Index all rank within the top 2%. Additional strategies, including the MarketGrader U.S. Large Cap Core Index and the MarketGrader U.S. Small Cap Core 100 Index (EW), also rank within the top 5%, reinforcing the breadth of strong performance across the lineup.
The five-year results are even more compelling and further highlight the durability of MarketGrader’s approach. Fourteen of our Core U.S. indexes rank within the top 5% of their respective peer groups, reflecting sustained outperformance over a full market cycle.
Equally notable is the absence of meaningful underperformance. Only two indexes fall outside the top decile over five years, and even then, by a narrow margin, ranking in the 11th and 12th percentiles, respectively. In other words, virtually the entire suite of MarketGrader U.S. Core Indexes has outperformed at least 88% to 89% of actively managed peers over this period. Figure 1 shows the peer group percentile rankings of all our U.S. Core Indexes in the last five years.
Figure 1. MarketGrader U.S. Core Indexes – 5-Year Rankings vs. Active Peer Groups
Taken together, these results underscore the value of maintaining a long-term investment horizon. They also highlight the benefits of a systematic, fundamentals-based approach to company selection and index construction. By consistently identifying companies with durable growth characteristics, strong financial profiles, and reasonable valuations, MarketGrader’s methodology enables excess returns to compound over time, producing sustained outperformance relative to active managers.
Download our latest MarketGrader vs. Active Managers Report Card to see how all our indexes have performed against their actively managed peers through March 31, 2026.
