Active vs Passive Investing

An actively managed fund has a manager who chooses which shares to buy and when, hoping to do better than the market. A passive fund doesn't choose: it holds what an index holds, in the same proportions or close to them, and takes the market's return. That's what an index fund does, and most ETFs work the same way. The question is whether the choosing pays for itself.

S&P Dow Jones Indices regularly compares actively managed funds with an index of the market they invest in, in a report called SPIVA. For funds based in Europe that invest in Swiss shares and are priced in francs, its report for the periods to the end of 2025 uses the S&P Switzerland BMI, a broad index of the Swiss market that counts dividends:

Over 1 year, 83.40% of the funds trailed the index or closed; over 3 years, 80.08%; over 5 years, 87.95%; and over 10 years, 84.07%. That leaves 16.60%, 19.92%, 12.05% and 15.93% that beat it. The fund returns are after their yearly costs. A fund that closed or merged along the way counts as one that didn't beat the index: of the 182 funds at the start of the 10 years, 68.68% were still there at the end.

A year earlier, for the 10 years to the end of 2024, 75.00% had trailed the index or closed. For funds investing worldwide and priced in euros, the record was starker: 98.44% trailed the S&P World or closed over the 10 years to 2025.

Over those 10 years the index grew 7.31% a year, compounded. The average fund, counting each fund the same, grew 6.20% a year: on CHF 10,000, the difference between CHF 20,249 and CHF 18,249. Weighted by size, so that big funds count for more, the average was 6.72%: CHF 19,163. An index fund trails its index too, by its own costs.

One reason for the gap is cost. An active fund pays for its managers and analysts and charges for that every year, whether or not it beats the index. Here are the yearly costs of some funds investing in Swiss shares, the TER or "ongoing costs" on their factsheets for September 2026:

Among the index funds and ETFs, the iShares Core SPI ETF (CH) cost 0.10% a year, the iShares SMI ETF (CH) 0.35%, the Raiffeisen Index Fonds SPI 0.41% and the UBS Core SPI ETF 0.09%. Among the actively managed funds, the Pictet CH Swiss Equities P cost 1.16%, the Raiffeisen Futura Swiss Stock A 1.20% and the UBS (CH) Equity Fund Swiss High Dividend P 1.50%. The key information documents of the Pictet and UBS funds, the short sheets funds publish for buyers, also name entry costs of up to 5% of what you pay in, which the seller may charge.

These are examples, not a survey. The funds are named so you can check the figures, not as a verdict on any of them, and the active ones also pursue aims of their own, such as high dividends or sustainability criteria. What a difference of 1.3 percentage points a year adds up to is on the TER page.

Active investing isn't only a fund manager picking shares. Choosing your own shares, for example by their price-to-earnings ratio, is active too, and so is moving in and out of the market, which means getting the timing right twice. Passive investing means buying the whole market through an index fund or ETF and holding it. A fair comparison counts dividends on both sides, as SPIVA's index does: the total return, not the price alone.

Some active funds do beat the index: over the 10 years, about one in six. The hard part is knowing which ones in advance. Single years swing a lot: in SPIVA's one-year figures for 2015 to 2025, most funds beat the index in 5 of the 11 years, and in 2016 only 22% trailed it. The three active funds above show both outcomes too: over the five years to September 2026, their factsheets show one ahead of the SPI and two behind it, after their yearly costs.

Passive investing has its own catch. An index fund gives you every fall of the market, and it holds whatever the index holds, in the index's weights, however few companies make up most of it.