Morningstar Active/Passive Rating

The Morningstar Active/Passive Rating evaluates how well actively managed funds (where managers pick investments to outperform the market) compare to their benchmark indices, versus passive funds (which track an index). The rating considers factors like risk-adjusted returns, fees, and consistency over time. A high rating suggests an active fund is likely to outperform its benchmark after costs, while a low rating indicates it probably won’t. This helps investors understand whether choosing an active fund offers a meaningful advantage over passive options, balancing potential for higher returns against higher fees and risks.