US equities: Passive trumps active in 2014

Wall streetUS-based investors put more money into passive equity funds than active funds in 2014, according to research by Morningstar.

Active US equity funds saw total outflows of $98.4 billion (€83.5 billion) in 2014, making passive funds the clear favourites with inflows of $166.6 billion.

December marked the 10th consecutive month of outflows for active US equity, while the passive side celebrated its 11th consecutive month of inflows.

Passive flows exceeded active flows for all equity Morningstar categories, including taxable-bond funds, which were impacted by withdrawals from Pimco. The firm lost a total of $150 billion in 2014, following the departure of Bill Gross in September.

However, investors seemed to prefer active management in other categories, such as allocation, municipal bonds, and alternative funds.

International equity was the most popular group amongst active funds, with inflows of $54.4 billion, and also received strong inflows of $89.8 billion from passive funds.

Amongst passive funds, US large blend and foreign large blend have attracted strong flows in recent months, showing investor preference for this approach as opposed to a growth or value focus.

Morningstar says outflows from high-yield-bond, bank-loan and short-government funds may have been driven by uncertainty about future movements of US interest rates, while investors were also nervous about emerging market funds, as a result of oil prices, a strong dollar and the situation in Russia.

Amongst US fund providers, Vanguard collected the greatest inflows on the passive side in 2014, with $200.8 billion of estimated net inflows, and also came second in terms of one-year flows on the active side.

J.P. Morgan was the active provider that attracted the most inflows over the period, drawing in a total of $28.0 billion.

©2015 funds europe