Active Management Exodus Slows for Summer (Sort Of)

401k, retirement, passive management
Are active managers getting washed away?

Passive management’s brutal beating of its active counterpart is apparently slowing for the summer.

Mutual fund and exchange-traded fund (ETF) asset flows for June show investors putting $9.3 billion into equity passive funds, down from $13.1 billion in May 2017.

On the active front, investors pulled $14.6 billion out of equity funds, compared with $16.2 billion in the previous month, according to research bigwig Morningstar.

Highlights (or lowlights, depending on point of view) from the Chicago-based company’s report include:

  • Investors continued to pour money into taxable-bond and international-equity funds. Unlike previous months, the taxable-bond category group saw higher inflows on the passive front than on the active one with inflows of $18.5 billion and $14.4 billion, respectively. Taxable-bond funds continued as the overall leader among category groups, with inflows of $32.9 billion; international equity followed with inflows of $28.9 billion.
  • The three Morningstar Categories with the highest inflows in June remained the same as the previous month: foreign large blend, intermediate-term bond, and large blend. A fourth category attracting strong flows in June was diversified emerging markets, anticipating stronger growth potential after the MSCI Emerging Markets Index returned 18.4 percent year to date.
  • Among top U.S. fund families, American Funds was the leader in active flows with $3.9 billion, followed by Vanguard with $2.9 billion. On the passive front, Vanguard was the top fund family, with inflows of $22.7 billion, closely followed by BlackRock/iShares with $22.4 billion in inflows.
  • Fidelity Series Intrinsic Opportunities Fund and Fidelity Series Growth and Income Fund attracted the largest active flows in June, both approximately $3.1 billion. PIMCO Income, which has a Morningstar Analyst Rating of Silver, was pushed to third place with flows of $2.6 billion. The passive fund with the highest inflows was Vanguard S&P 500 ETF Index Fund, which saw $3.1 billion in inflows.
  • Fidelity Series Equity-Income Fund had the highest outflows for active funds at $6.5 billion and Gold-rated Harbor International saw outflows of $1.0 billion, its third consecutive month on the bottom-flowing list. On the passive front, Power Shares NASDAQ-100 Index Tracking Stock ETF saw the highest outflows of $2.8 billion.
John Sullivan
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With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.

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