Dispatches Morningstar Medalists Have Held Up Well For the first five months of 2022, the average performance of funds in each of Morningstar's three main categories-Europe large-cap blend equity, U.S. large-cap blend equity, and global large-cap blend equity-trailed that of representative exchange-traded funds. But averages obscure the fact that these categories include index funds, as well as supposedly active funds that are very tied to the benchmark but charge fees as if their management were truly active. These are known as closet indexers. Tracking error can distinguish closet indexers from truly active funds. It measures the volatility of the return differences between a fund and its benchmark over a given investment period, which indicates how closely the fund tracks that benchmark. A small tracking error indicates that the fund is very similar to its benchmark, while a large tracking error indicates the opposite. For a closer look at how these three categories performed for the year through May, we excluded index funds and then subdivided the rest into four quartiles by three-year tracking error. Funds with the highest three-year tracking error are in quartile 1; funds with the lowest tracking error are in quartile 4. We also singled outhttps://www.morningstar.hk/hk/author/2165/fernando-luque.aspx#:~:text=Fernando%20Luque%20es%20el%20Senior%20Financial%20Editor,de%20www.morningstar.es%20Collections%20All%20Morningstar%20Articles%20%26%20Videos