Actively Managed Mutual Funds. What They Are, How They Work & Examples

Here's a sobering fact: in 2025, only 42% of actively managed funds survived and beat their passive counterparts, down from 47% the previous year.

Yet despite this challenging landscape, actively managed mutual funds still control approximately $14.1 trillion in assets as of Q1 2025. No, that's not a typo and you read it right. Trillions.

While passive investing has gained dominance, certain actively managed funds and categories, particularly fixed-income and real estate, continue to deliver real value.

This guide cuts through the noise with an honest, data-driven examination of actively managed mutual funds.

You'll learn when they make sense, how to evaluate them, which funds have actually delivered results, and what to watch in 2026. We'll cover the best-performing funds, explain exactly when you can buy and sell them, and show you the metrics that separate winners from losers.

Whether you're considering your first active fund or reassessing your current holdings, you'll get the straight truth about active management.

Actively managed mutual funds are pooled investment vehicles where professional fund managers actively select securities with the goal of outperforming a benchmark index like the S&P 500.

Unlike passive funds that simply track an index, active mutual funds rely on human judgment. The core premise is straightforward: fund managers use research, market forecasting, and their own expertise to decide what to buy, sell, and when.

They can adjust holdings based on market conditions, economic outlook, or company-specific research.

When you invest in an actively managed mutual fund, you pool your money with other investors, and the fund manager invests this capital across stocks, bonds, or other securities depending on the fund's objective.

These active mutual funds come in various categories: large-cap, mid-cap, small-cap equity funds, as well as fixed-income, real estate, and international funds.

The fund manager's expertise and strategy are what you're paying for, and the hope is that their skill will generate returns that exceed what a simple index fund would deliver.

Actively managed mutual funds are regulated by the SEC and must disclose their holdings, fees, and performance regularly. This transparency helps you evaluate whether a fund's strategy aligns with your goals and whether the manager is delivering on their promises.

The mechanics of actively managed mutual funds are different from stocks or ETFs:

• You purchase shares at the net asset value (NAV) calculated at the end of each trading day.
• Unlike stocks or ETFs that trade throughout the day, mutual fund transactions occur once daily after markets close at 4:00 PM Eastern Time.
• The fund manager and their research team continuously analyze securities, making buy and sell decisions based on their investment strategy and market outlook.
• A typical fund holds dozens to hundreds of individual securities, providing built-in diversification.
• Portfolio turnover is a key characteristic of active management. Active managers frequently trade holdings, with typical turnover rates near 100% annually, meaning they replace most holdings within a year.
• This trading activity generates transaction costs and potential tax consequences that eat into your returns.
• Fund managers charge an expense ratio (management fee) to cover their research, trading, and operational costs, typically ranging from 0.47% to 0.99% depending on fund size and complexity.
• As an investor, you receive your proportional share of any dividends, interest, or capital gains the fund generates. These distributions are typically made annually and can create tax obligations even if you don't sell your shares.

How Does Selling of Actively Managed Mutual Funds Work

Actively managed mutual funds trade once per day at the closing NAV (net asset value), calculated after markets close at 4:00 PM Eastern Time. This differs fundamentally from stocks and ETFs that trade continuously throughout the day.

The cutoff time matters:

• Orders placed before 4:00 PM ET are executed at that day's closing NAV
• Orders after 4:00 PM are executed at the next business day's NAV

The actual NAV calculation and trade settlement happens after market close, so you don't know the exact price when placing orders.

The T+1 settlement cycle means trades settle one business day after execution, so proceeds from sales are available the next business day.

Many funds impose short-term trading fees or redemption fees if you sell shares within 30 to 90 days to discourage market timing.

How Does Buying of Actively Managed Mutual Funds Work

You can purchase actively managed mutual funds through brokerage accounts, directly from fund companies, or through retirement plans like 401(k)s.

Most funds have minimum initial investment requirements, typically $1,000 to $3,000, though subsequent investments may have lower or no minimums. Systematic investment plans allow automatic monthly purchases with lower minimums.

Actively managed mutual funds are best suited for long-term investors, not day traders, due to their once-daily pricing and potential redemption fees.

You can place orders online, by phone, or through financial advisors, with most major brokerages offering access to thousands of mutual funds.

While most active funds underperform, a select group has consistently delivered strong results over the past 10 years.

The funds listed below represent those rare managers who have successfully beaten their benchmarks after fees, a feat achieved by fewer than 22% of actively managed funds.

These funds span different categories and investment styles, demonstrating that active management can work when executed with discipline and skill.

Disclaimer: Past performance doesn't guarantee future results, but these funds have demonstrated consistent processes and experienced management teams worth your attention.

Vanguard Wellington Fund (VWELX)

This balanced fund invests approximately 65% in stocks and 35% in bonds, focusing on dividend-paying large-cap companies and investment-grade bonds.

It has delivered approximately 9% to 10% annualized returns over the past decade with lower volatility than pure equity funds.

Established in 1929, it's one of the oldest mutual funds in existence, with an expense ratio of just 0.25%. The fund's conservative allocation makes it suitable for investors seeking growth with downside protection.

Its long track record through multiple market cycles demonstrates the staying power of a disciplined, balanced approach.

T. Rowe Price Blue Chip Growth Fund (TRBCX)

This fund focuses on large-cap growth companies with strong competitive advantages and above-average earnings growth.

It has generated approximately 13% to 14% annualized returns over the past decade, outperforming the S&P 500 Growth Index.

The fund's concentrated approach typically holds 80 to 120 positions and emphasizes quality companies in technology, healthcare, and consumer sectors.

With an expense ratio of 0.70%, it represents one of the best active mutual funds for investors seeking growth exposure with active management. The fund's willingness to concentrate in high-conviction ideas has paid off for long-term investors.

JPMorgan Equity Income Fund (OIEJX)

This fund targets dividend-paying stocks with attractive valuations and strong fundamentals, primarily large-cap value companies.

It has delivered approximately 10% to 11% annualized returns over the past decade while providing above-average dividend income.

The fund's defensive positioning helped it outperform during market downturns, making it attractive for income-focused investors.

With an expense ratio of 0.63%, it offers a reasonable cost for active management in the income space. The fund balances capital appreciation with current income, appealing to investors nearing or in retirement.

Fidelity Contrafund (FCNTX)

This large-cap growth fund invests in companies the manager believes are undervalued relative to their growth potential.

It has generated approximately 12% to 13% annualized returns over the past decade, with significant positions in technology and communication services.

Legendary manager Will Danoff has run the fund since 1990, providing remarkable continuity and institutional knowledge. With an expense ratio of 0.82%, it's among the pricier options on this list, but Danoff's track record has justified the cost.

The fund's size (over $100 billion in assets) hasn't prevented strong performance, though some question whether it can maintain nimbleness at this scale.

Dodge & Cox Stock Fund (DODGX)

This value-oriented fund focuses on large-cap stocks trading below their intrinsic value, with a contrarian approach.

It has delivered approximately 11% to 12% annualized returns over the past decade, outperforming value benchmarks during a period when growth dominated.

The fund's patient, long-term investment approach and team-based management structure (rather than a single star manager) provide stability.

With an expense ratio of 0.52%, it offers reasonable pricing for active value management. The fund's willingness to look different from the benchmark and hold positions for years demonstrates true active management.

Harbor Capital Appreciation Fund (HCAIX)

This fund invests in companies with sustainable competitive advantages and strong growth characteristics across all market caps.

It has generated approximately 14% to 15% annualized returns over the past decade, with concentrated positions in high-conviction ideas.

The fund's flexible mandate allows it to adapt to changing market conditions, moving between large-cap and mid-cap opportunities as valuations shift.

With an expense ratio of 0.64%, it offers competitive pricing for its strong performance. The fund typically holds 40 to 60 positions, demonstrating true conviction in its best ideas rather than index-hugging behavior.

These six funds share common characteristics that set them apart:

• Experienced management teams with long tenures
• Disciplined investment processes that remain consistent through market cycles
• Reasonable expense ratios relative to their categories
• Willingness to differ meaningfully from their benchmarks (high Active Share)

They represent the minority of active managers who have justified their fees through actual outperformance.

Beyond established winners, several actively managed funds have demonstrated strong recent performance and compelling strategies worth monitoring in 2026.

These funds may not have full 10-year track records but show promising characteristics including innovative approaches, strong recent performance, or positioning for current market dynamics.

Several are newer active ETF structures that combine active management with ETF tax efficiency and lower costs.

Capital Group Dividend Value ETF (CGDV)

This active ETF focuses on dividend-paying stocks with strong fundamentals and attractive valuations.

It offers Capital Group's institutional research capabilities (the same team behind American Funds) in a low-cost ETF wrapper with a 0.33% expense ratio.

The fund has strong positioning in financials and healthcare sectors that may benefit from 2026 economic conditions.

Capital Group's entry into the ETF space brings decades of active management experience to a more tax-efficient structure.

Avantis U.S. Small Cap Value ETF (AVUV)

This fund targets small-cap value stocks with higher profitability and investment characteristics.

Its systematic active approach has outperformed traditional small-cap value indexes with strong performance in 2024 and 2025.

With an expense ratio of 0.25%, it offers active insights at near-passive pricing. Watch for continued small-cap opportunities as interest rates stabilize and smaller companies benefit from improved financing conditions.

JPMorgan Active Growth ETF (JGRO)

This fund invests in high-quality growth companies with sustainable competitive advantages.

JPMorgan demonstrated strong 2024 performance across its active lineup, and this fund features a concentrated portfolio of 40 to 60 holdings.

With an expense ratio of 0.44%, it offers reasonable pricing for active growth management. The fund is positioned for companies benefiting from AI and technology transformation, themes likely to continue through 2026.

Dimensional U.S. Core Equity 2 ETF (DFAC)

This fund uses a systematic approach to tilt toward smaller companies and value stocks while maintaining broad market exposure.

Dimensional's strong academic research foundation and consistent outperformance have built a loyal following.

With an expense ratio of just 0.17%, it offers active insights at remarkably low costs. Watch for its balance of active factor tilts with index-like diversification and pricing.

T. Rowe Price U.S. Equity Research ETF (TSPA)

This fund leverages T. Rowe Price's extensive research team to identify undervalued stocks across all market caps.

The fund's flexible mandate and strong 2024 to 2025 performance demonstrate the value of deep research capabilities.

With an expense ratio of 0.31%, it offers competitive pricing. The fund is positioned to capitalize on market dislocations and mispriced opportunities that may arise in 2026.

iShares Focused Value Factor ETF (FOVL)

This active ETF combines value factor screening with active overlay to avoid value traps.

Its concentrated portfolio typically holds 50 to 75 positions and has delivered strong performance as value investing has regained favor.

With an expense ratio of 0.20%, it offers low-cost access to enhanced value strategies. Watch for continued value outperformance if economic growth accelerates in 2026.

Putnam Focused Large Cap Growth ETF (PGRO)

This fund maintains a concentrated portfolio of 30 to 40 large-cap growth companies with strong competitive moats.

Putnam has shown recent improvements in active management performance, and this fund's high-conviction approach demonstrates true active management.

With an expense ratio of 0.55%, it's positioned for quality growth companies with pricing power in potentially inflationary environments.

Actively managed funds charge an average of 0.59% versus 0.11% for passive funds, a 0.48% gap that compounds dramatically.

Over 30 years, $10,000 invested at 10% annual returns grows to $165,223 with 0.20% fees but only $115,582 with 1.50% fees, a 43% difference in final wealth.

Beyond expense ratios, hidden costs lurk:

• Portfolio turnover generates trading costs and tax consequences that can match or exceed the stated fees.
• High turnover (often 100% annually for active funds versus under 20% for passive) creates frequent short-term capital gains taxed up to 37%.

Research confirms funds in the cheapest quintile succeeded 60% of the time over 10 years versus just 23% for the priciest funds. Fees represent a mathematical headwind active managers must overcome before delivering any excess returns.

Want to dive deeper? We have a dedicated page about actively managed index fund fees where you can explore this topic in detail.

Identifying successful active managers before they outperform is extraordinarily difficult. Past performance is a poor predictor of future results, with fewer than 5% of top-half performers remaining there four years later.

However, certain characteristics correlate with better outcomes:

Active ETFs represent a structural evolution in how active management is delivered to investors. More than 1,400 active ETFs have launched in the past five years, outpacing both passive ETFs and mutual funds.

Approximately as many active ETFs now exist as passive ETFs, though active ETFs represent only 7% of overall ETF assets in 2024. However, they captured 37% of ETF flows and nearly 24% of ETF-driven revenues, demonstrating their rapid growth trajectory.

The structural advantages are compelling:

• Active ETFs offer superior tax efficiency through in-kind redemption mechanisms that avoid triggering capital gains, unlike mutual funds that must sell securities to meet redemptions.
• JPMorgan research shows ETFs distribute far fewer capital gains than mutual funds.
• Active ETFs have a much lower barrier to entry, as you can start with just the price of one share (often under $100) or even $1 if your broker offers fractional shares, compared to the $1,000–$3,000 minimums typical of mutual funds.
• ETFs trade throughout the day like stocks, and typically carry lower expense ratios than equivalent mutual funds.
• Leading asset managers including Capital Group, JPMorgan, T. Rowe Price, Dimensional, and Avantis have launched active ETF lineups.

There is one constraint, though: unlike mutual funds that can close to new investors when assets threaten strategy execution, ETFs cannot restrict new investors, potentially forcing managers to compromise concentrated or less-liquid strategies as assets grow.

Many asset managers are converting existing mutual funds to ETF structures, with over $60 billion in AUM transitioning since March 2021.

Active ETFs represent the future of active management, combining professional management with the structural advantages of ETF vehicles. Consider active ETFs over traditional mutual funds when both options exist, given the tax efficiency and cost advantages.

Warren Buffett has been remarkably consistent in his recommendation for most investors: skip active funds. His famous quote says it all: "By periodically investing in an index fund, the know-nothing investor can actually out-perform most investment professionals."

Buffett has consistently recommended low-cost S&P 500 index funds for most investors since his 1993 shareholder letter.

In 2020, he stated: "For most people, the best thing to do is to own the S&P 500 index fund." His will specifies that money left to his wife should be invested 90% in a low-cost S&P 500 index fund and 10% in short-term government bonds, demonstrating his conviction.

Buffett also observed the challenge of identifying skilled managers in advance: "The probability is also very high that the person soliciting your funds will not be the exception who does well."

Michael Hiltzik from the Los Angeles Times wrote: "The debate isn't really about whether index funds perform better than actively managed funds, that debate is essentially over, and indexing wins, hands down."

Barry Ritholtz adds perspective on behavioral benefits: "Indexing gives you a better chance to be less stupid," emphasizing that passive investing helps investors avoid costly mistakes.

Even these advocates acknowledge that a small percentage of active managers do outperform, but identifying them in advance remains extraordinarily difficult.

The consensus among investment professionals favors passive investing for most investors, while acknowledging the nuances and exceptions.

The evidence overwhelmingly favors passive investing, with over 78% of actively managed funds underperforming or closing over 10 years. However, active management isn't entirely without merit, it just requires careful, evidence-based selection.

When active management has better odds: fixed-income, real estate, small-cap, and emerging markets show more promise than large-cap U.S. equity.

Success depends on low fees, high Active Share (above 80%), experienced management, and concentrated portfolios.

A practical approach: Build your core portfolio with low-cost index funds for broad market exposure, then consider selective active allocations only in categories where evidence supports their potential. Any active fund should meet strict criteria and represent a minority of your overall portfolio.

Active ETFs offer advantages over traditional mutual funds, especially tax efficiency in taxable accounts, while mutual funds' once-daily trading and potential redemption fees make them better suited for long-term investors.

While careful analysis can help identify the minority of active funds worth considering, success isn't guaranteed. Many investors achieve better outcomes by simply indexing their entire portfolio.