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The indexing and ETF communities received a significant blow when, in an extremely rare occurrence, slightly more than half the actively managed mutual funds holding stocks outperformed their benchmark indexes.

According to the Standard & Poor’s Indices Versus Active Funds Scorecard (SPIVA), for the year ended June 30, the S&P Composite 1500 Index, tracked by the iShares S&P 1500 Index Fund (ISI) outperformed only 48.99% of all the domestic equity funds. Small-capitalization stocks were responsible for pushing active managers over the 50% mark, with the S&P SmallCap 600 Index, tracked by the iShares S&P SmallCap 600 Index Fund (IJR), beating only 47.5% of all small-cap funds.

This plays into one of the main reasons for using active fund managers: they can spot inefficient pricings in markets ignored by Wall Street analysts and institutions. This strategy typically works well with small stocks and equities in emerging markets.

But fans of active management shouldn’t crow too loudly, in all the other categories, the indexes won. The S&P 500 Index, tracked by the SPDR (SPY), beat 60.5% of the active managers, the S&P MidCap 400 – SPDR S&P MidCap 400 ETF (MDY) – beat 66.7% of the active managers.

Breaking it down further, between growth, core and value, small-cap value was the true hero, with 60.4% of the funds beating the S&P SmallCap 600 Value Index and the iShares S&P SmallCap 600 Value Index Fund (IJS). However, over three years, the index beat 52.3% of the funds.

Most shocking was large-cap value funds. Over the past year, 54.6% of the large-cap value funds posted better returns that the S&P 500 Value Index — iShares S&P 500 Value Index Fund (IVE). For the 3-year and 5-year periods, the percentage of large-cap value funds that topped the index were 55.9 and 64.7, respectively.

But investors in ETFs and an indexing strategy shouldn’t worry, the results don’t include the recent stock swoon. And in the 2008 crash, the average equity fund plunged 39.5%, according to Lipper, compared with the 37% drop in the S&P 500.

However, one of the big reasons for not buying actively managed funds is that few can consistently beat the indexes. So, a one-year record might just be a bit of luck. And the long-term results bear it out. Over three-years, small-cap funds still had the best record, but the indexes beat 63.1% of the funds. That only increased for the other categories, with 75% of all midcap funds beaten by its benchmark.

Meanwhile, growth funds took a kick to the teeth. Over the three-year period, the indexes beat 75% of the large-cap growth funds, 84.1% of the mid-cap growth funds and 69.6% of the small-cap growth funds. And for the five-year periods, all the growth sectors fared worse. These funds track the winning indexes: S&P 500 Growth Index Fund (IVW), S&P MidCap 400 Growth Index Fund (IJK) and S&P SmallCap 600 Growth Index Fund (IJT).

Source: Indexes Beaten By Small Cap And Large Cap