By a narrow margin, actively managed large-cap mutual funds on average bested the S&P 500 during the first half of 2005, according to Standard & Poor's. The defeat was far from resounding, with only 52.5% of such funds topping the index.

"Energy, utilities and real estate issues led the market in the first half of 2005," said Rosanne Pane, mutual fund strategist at S&P. "Large-cap funds benefited from their overweight in those segments relative to the S&P 500. Cash holdings also helped large-cap active fund managers edge ahead of the S&P 500, which returned a -0.81% through the end of June."

Over the long haul, the indices, which have no transaction or other costs, still beat out actively managed funds. Over the past three years, the S&P 500 has outperformed 74.5% of large-cap funds; the S&P 400 has outperformed 79.1% of mid-cap funds; and the S&P SmallCap 600 has outperformed 76.8% of small-cap funds.

Among index funds, asset-weighted returns are a little higher than equal-weighted returns for the S&P 500, S&P MidCap 400 and S&P SmallCap 600 over three and five years.

"The difference in returns among equal and asset weighted averages suggests that, among index funds, funds with bigger assets have performed better," said Srikant Dash, index strategist at S&P. "Larger funds have smaller expense ratios and greater efficiencies of scale, which explains the difference in returns."

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