Topping the broad U.S. equity market has become more elusive in recent years. In 2018, about 69% of all U.S. active equity funds failed to outperform the S&P 1500 index, their fourth-worst showing since 2001. The best years for active funds by this measure were 2009 and 2013 when only 40.7% and 43.3% of funds fell below the index, respectively. In 2009, the S&P 1500 had a total return of 27.2% as equity recovered from the global financial crisis and 2013 when the index was up 32.8%.
In general, the pattern shows that markets must not only be positive for active funds to do well on a relative basis, but do very well. The average annual return when less than half of active funds miss the index is 19.5%, while the average return when most funds underperform is 1.5%. The former case occurred six times in the past 18 years.