The paper uses market-wide implied cost of capital to investigate changes in mutual funds’ risk exposures. The approach is solely based on market information at the respective time and seems natural, as analysts and fund managers possess similar knowledge and skills. Using a sample of 4147 US equity mutual funds, the paper provides evidence for time-varying risk exposures for all funds, independent of their style and size focus. Furthermore, they find that value (growth) funds reduce their value (momentum) loadings in times of a high expected market risk premium. However, only for small- and mid-cap funds, this beneficial behavior seems to be attributed to active management. After controlling for time-varying risk factors, they find that all fund types perform equally poorly measured by their alpha.