Nearly 74 percent of the Swedish population invests in funds and the options are therefore various. The Swedish private investors can choose between active and passively managed funds. Fund managers, who seek to generate higher returns than the market, manage active managed funds. Unlike the active managed funds, passively managed funds do not require any active investment decisions.

Fama’s (1970) efficient market theory reflects all available information in the stock price, therefore it is not possible to predict how the stock price changes. According to the theory it is not possible to create any higher returns on the fund market for the private investors.

The aim of this study is to investigate which form of management that generates the highest risk-adjusted returns for the private investor during a ten year period and further to provide guidance to the investor in their investment choice. The focus is on Swedish and Global funds, which are the most popular choices among private investors in Sweden. The results of the study show that active management generally provides a higher risk- adjusted return for the private investor during a long term investment.

In conclusion the study shows that active management generally can create a higher return for the private investor during stable economic conditions, however, during unstable economic conditions fund managers fail to provide a higher return. This means that passively managed funds are to prefer during unstable market conditions.