A 100% Wipeout: The Awkward Truth About Taiwan's Large-Cap Active Funds — and One Twist

If "a dumber market is easier to beat" were true, Taiwan's managers should win in a walk. But the 2024 data slapped that intuition hard — and then handed it a redemption.

2026.06.03 ｜ Shiba the Disciplined ｜ ProfitVision LAB ｜ Active vs. Passive Series: ① U.S. → ② Taiwan (this piece) → ③ The Marathon Fund → ④ Active ETFs

The Conclusion First: in 2024, Taiwan's Large-Cap Active Funds Were Wiped Out

In Part 1 we saw that U.S. active funds lose badly to the index over time. But you've been holding a trump card: the U.S. market is too efficient — Taiwan is different. Retail investors are 60–70% of trading volume; pricing is emotional and information asymmetric — in theory, a paradise for active managers hunting bargains.

The hypothesis sounds airtight. Until you open S&P Dow Jones Indices' Taiwan-covering SPIVA Scorecard (SPIVA Asia Ex-Japan, data through year-end 2024). The conclusion is two words: total wipeout.

You read that right — 100%. In 2024, not a single Taiwan large-cap active fund beat its benchmark — in a year when that benchmark (representing Taiwan's large-cap market) returned a total +35.3%. Managers didn't lose narrowly; they collectively failed to keep up with a wildly rising market. Stretch to five years, and only about 16% won.

The original script was "dumb market → smart people profit." Yet in Taiwan large-caps, active managers lost even more completely than their U.S. peers. So where exactly is the "dumber market is easier" intuition wrong?

Where Does "A Dumber Market Is Easier to Beat" Go Wrong?

The blind spot is this: it assumes inefficiency is spread evenly across the whole market. In reality, Taiwan's inefficiency is extremely uneven.

The large-cap heavyweights — TSMC, MediaTek, Hon Hai — are the most closely watched stocks by foreign investors, institutions, and analysts on earth. Their pricing isn't dumb at all; it's arguably as efficient as U.S. large-caps. A manager trying to find "a bargain nobody else saw" in TSMC faces a nearly impossible task.

And worse is the structural problem in the next section: when nearly all of the market's gains come from TSMC, and your benchmark (0050) is more than half TSMC, then the moment an active manager dares to "diversify," they're doomed to lag.

The Twist: But in Small/Mid-Caps, 90% of Managers Won

If the story ended there, the verdict would be "Taiwan's active funds are hopeless too." But the same SPIVA report hides a number that should reset your thinking —

The weak version of this argument would be: "One year, 90% won, therefore small/mid-cap active funds are always better." That is not the claim. A single year can be influenced by cycles, factor rotation, fund classification, and sample size. The stronger point is that the same SPIVA scorecard shows two opposite results in the same market and the same year: large-caps 100% lost, while small/mid-caps 90% won. The difference was not that managers suddenly became smarter; it was that the market structure they faced was different.

This makes the evidence sturdier. The small/mid-cap result was not just a pretty one-year datapoint: over five years, only 44% of Taiwan small/mid-cap funds lagged their benchmark, meaning a majority still won. Large-caps, by contrast, had 100% underperformance over one year and 80% and 84% underperformance over three and five years, respectively. The two pools were simply not equally beatable.

The return numbers point in the same direction. SPIVA's equal-weighted returns show Taiwan small/mid-cap funds returned about 22.98% in 2024, versus 9.79% for the S&P Taiwan MidSmallCap. On an asset-weighted basis, Taiwan small/mid-cap funds returned about 24.46%, still above the benchmark. In other words, the result was not only a few tiny funds flattering the win rate; the asset-weighted lens did not erase the advantage.

This contrast lights up the whole truth. Taiwan's active managers are neither "dumber" nor "more gifted" — their win or loss depends on which pool they fish in:

The intuition that "inefficiency creates alpha" is in fact correct — it just doesn't happen in large-caps. It happens in the small/mid-cap corners with no ten analysts watching, no one reading the filings line by line, and retail sentiment in charge. Inefficiency is the soil where alpha grows.

One important detail makes this harder to dismiss: the S&P Taiwan MidSmallCap is not a hand-picked basket of weak stocks. It combines the mid- and small-cap companies in the S&P Taiwan BMI, representing the bottom roughly 30% of float-adjusted market capitalization. So the benchmark is part of the investable market, not an artificially easy target. The higher active win rate points to real gaps in coverage, liquidity, and pricing efficiency.

Why Are Large-Caps So Hard? Start with 0050's TSMC Concentration

To see why large-caps are a graveyard for active managers, just look at what's inside 0050. Yuanta's official holdings page shows that, as of June 3, 2026, the concentration of Yuanta Taiwan 50 (0050) is staggering:

Grasp what this means: more than half of 0050 is a single stock, TSMC. In Taiwan investing shorthand, "beating 0050" is therefore close to "betting right on TSMC." When TSMC soars (as in the 2024 AI rally), 0050 automatically soars with it; meanwhile any responsible, diversification-minded manager could never hold TSMC near 58% — and that alone dooms them to lag in years TSMC leads.

This is the "index concentration problem" from Part 1, in its Taiwan extreme. The U.S. has the Magnificent Seven; Taiwan has a "Magnificent One" — the whole market held hostage by a single silicon shield. The cap-weighted index is itself the most concentrated bet there is, and the harder a manager tries to control risk, the further behind they fall.

So What About the Marathon Fund That "Beats 0050"?

By now you'll think of one famous fund: Capital Taiwan Marathon. Nearly 30 years old, it's marketed as the evergreen champion that "beats 0050 year after year," a living billboard for Taiwan's active funds.

If large-cap active funds were 100% wiped out, how does the Marathon beat 0050 year after year? Is it the one-in-a-thousand genuine skill, or is something else going on?

In Part 3, we put this evergreen champion on the operating table. We'll re-measure it with a yardstick fairer than 0050 — the total-return Taiwan index. The result will completely change how you understand the words "beat the market."

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