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Passive Funds Flows Put Active to Shame (Again)

Equity mutual fund and ETF flows positive fifth consecutive month

401k, passive management, mutual funds, ETFsActive continues its rough go.

Passive mutual fund and ETF flows gained big in net assets in March, while active (once again) got whacked.

The month saw investors put $31.1 billion into U.S. equity passive funds, up from $29.1 billion in February 2017.

On the active side, investors pulled $18.6 billion out of equity funds during the month, as opposed to $8.9 billion in the previous month.

In total for both active and passive funds, U.S. equity mutual fund and ETF flows were positive flows for the fifth consecutive month.

Taxable-bond funds attracted the highest total inflows among category groups of $38.1 billion in March. Flows were almost evenly distributed between active and passive taxable-bond funds, underlining that in fixed income, as opposed to equity, active management is alive.

International-equity flows have been positive for four consecutive months, indicating renewed investor interest toward diversification overseas. Investors prefer passive international-equity funds, which attracted $20.6 billion in March, while their active counterparts sustained $2.9 billion in outflows.

Commodities saw $384 million in outflows from precious-metals funds following a drop in gold prices, which later recovered.

Among top U.S. fund families, PIMCO had inflows of $4 billion, surpassing Vanguard in terms of active flows. Vanguard saw inflows of $1.8 billion on the active side and was the top fund family on the passive side, with inflows of $36.2 billion.

Providing a sharp contrast to the predicament of active equity managers, all five top-flowing funds in March were bond funds.

In addition to PIMCO Income, which has a Morningstar Analyst Rating of Silver, fixed-income funds including Bridge Builder Core Bond Fund, Bronze-rated Prudential Total Return Bond, T. Rowe Price New Income Fund, and Gold-rated Dodge and Cox Income attracted more than $1.0 billion each.

Gold-rated Vanguard Institutional Index Fund was the passive fund with the worst outflows of $2.6 billion last month. On the active side, two J. P. Morgan funds, JPMorgan High Yield Fund and JPMorgan Short Duration Bond Fund, landed in the bottom-flowing five in March with respective outflows of $1.7 billion and $1.3 billion.

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