In a surprise to absolutely no one, passive assets have (almost) completed their journey to parity with their active counterparts—at least in the U.S. equity fund space.
Morningstar reports passive U.S. equity funds saw total assets of $4.3 trillion by month end, just $6 billion shy of active U.S. equity funds’ total assets.
“It’s worth keeping in mind that mutual funds and ETFs are not representative of the broader U.S. equity market, but this is a milestone that has been a long time coming as the trend toward low-cost fund investing has gained momentum,” Kevin McDevitt, senior analyst and author of the Morningstar Fund Flows Report, said in a statement. “Active U.S. equity funds have had outflows every year since 2006 with roughly equivalent inflows into passive funds during that time.
Other findings
In April, passive U.S. equity funds closed the gap with $39.3 billion in inflows, versus $22.2 billion in outflows for their active counterparts.
Demand for taxable-bond funds continues to grow, collecting approximately $42.5 billion in April. The bulk of those flows went to core intermediate-term bond funds. Passive funds also took in more than active with about $25 billion versus $17.0 billion.
Among other major Morningstar groups, only municipal bonds saw inflows, which were $7.1 billion. All other groups had outflows, including international equity, which saw about $8.8 billion in outflows. After strong demand in recent years, international-equity funds have taken in just $4.3 billion over the past 12 months.
Among the 10 largest U.S. fund families, iShares and State Street saw the first- and second-greatest inflows at $8 billion and $7.5 billion, respectively.
Both benefitted from the trend towards core investments.
Vanguard trailed both iShares and State Street with $5.5 billion in inflows, the firm’s weakest showing since 2013.
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.
