February 2013

IN NUMBERS: A dramatic tilt to passive

In numbersMutual fund investors in the United States look particularly annoyed with active returns if fund flow data is anything to go by, says Nick Fitzpatrick.

The past five years have seen a dramatic outflow from active equity funds in the US and an even larger inflow into passive funds – $584 billion (€431 billion) flowed out of the active funds and $629 billion went into passive funds, according to figures from Morningstar (see Figure 1).

The flow of funds takes place as some investors seek a tighter control on fees, such as the Wyoming Pension System (see page 12).

Morningstar says that of the $629 billion inflow to passive funds, about two-thirds of that was into exchange-traded funds (ETFs) rather than traditional passive vehicles.

Assets under management in international ETFs available in the US far outweigh those in traditional passive funds, reflecting the popularity of the ETF product there (see Figures 2 and 3).

Meanwhile, flows to bond mutual funds grew again in 2012 after a lull in 2011, though outflows from equities continued to grow (see Figure 4).

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