The debate between active and passive investing isn’t really a debate any more, at least not among those who’ve looked at the data.
The latest Spiva New Zealand Scorecard, released in April 2026, found that 74% of New Zealand’s actively managed global equity funds underperformed the S&P World Index over 2025.
Over 10- and 15-year periods, that figure climbed to 100%.
Every single active global equity fund in the country failed to beat the index over those longer horizons. Not one outperformed.
Domestic markets tell a similar story: 65% of active NZ equity funds fell short of the NZX50 last year (85% over 15 years), and 79% of NZ bond funds underperformed in 2025, breaking a four-year run.
This isn’t a bad year. It’s a pattern repeated across decades, geographies, and market conditions.
The majority of active managers, after fees, fall short.
And past outperformance has almost no predictive value for future outperformance. Last decade’s star fund manager is often this decade’s cautionary tale.
There’s a popular argument that active managers should shine in turbulent markets.
The evidence says the opposite: international research across 16 countries finds equity funds tend to underperform during recessions, as managers trade more aggressively when conditions get rough and costs eat into the edge.
Why investors still choose the shadows
The prisoners in the cave weren’t stupid. They just hadn’t seen anything different.
Active investing feels like it should work. Surely a skilled broker with Bloomberg terminals and a team of analysts can outsmart the market? Surely paying more gets you more?
However right it feels … it just isn’t.
We’re hardwired to believe that effort produces results, expertise commands outcomes, and paying a premium signals quality.
These instincts serve us well in most areas of life.
In investing, they routinely lead us astray. We remember the manager who called the 2008 crash; we don’t remember the nine who got it wrong.
Financial media reinforces this relentlessly – every week, a new “hot fund”, a stock tip dressed up as insight. It keeps investors glued to the shadows, convinced they’re watching something real.
The cost of staying
Compounding works both ways: returns compound up, but fees and underperformance compound down. The difference between a 1% annual fee and 0.35% might sound trivial.
Over 30 years, it can amount to hundreds of thousands of dollars; money that should be in your retirement, not paying for someone else’s.
The light is there
The exit from the cave is well-signposted. Evidence-based investing isn’t complicated: own broadly diversified, low-cost funds, stay invested through volatility, and tune out the noise. Discipline over drama. Patience over prediction.
It also helps enormously to work with the right kind of adviser. One who operates on a fee-only basis, paid directly by you rather than through commissions, and who acts as a fiduciary: legally and ethically obligated to put your interests first. In New Zealand, that combination is rarer than it should be, but it exists, and it matters more than most investors realise.
A good financial adviser’s job isn’t to drag anyone out blinking into the sunlight.
But it is to make sure you know the door exists, and that you don’t have to navigate it alone, or pay someone whose interests don’t align with yours to show you the way.
The shadows on the wall were never the whole story. Don’t let them dictate your investment narrative.
