Passively Managed Responsible Investing Mutual Funds And ETFs Outdraw Active Counterparts In Q2

Investors injected some $20.9 billion into SRI- and ESG-focused mutual funds and ETFs (collectively, responsible investing [RI] funds) during Q2 2021, bringing the one-year net inflows total to $70.4 billion.

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In contrast to Q1 2021, estimated net flows into long-term RI funds for Q2—excluding money markets funds again—significantly favored passively managed RI funds (+$10.8 billion) over their actively managed RI brethren (+$5.9 billion). In comparison to their non-RI fund counterparts in both the active versus passive breakouts, all the Lipper RI fund macro-groups witnessed net inflows, including actively managed domestic equity RI funds. So, on the RI side of the fence, investors continue to embrace actively managed domestic equity funds while shunning actively managed domestic equity funds on the non-RI side.

We have written in the past about the stickiness of assets in this RI subset. Investors appear to be willing to put their money where their convictions are generally for the long haul when it comes to socially responsible investing practices.

Total asset under management continued to favor actively managed RI fund (+$537.2 billion) over their passively managed counterparts (+$127.2 billion). As we have mentioned before, this is more than likely a result of investors’ long-term commitment to SRI practices seen as early as the 1920s in the U.S., when one of the first publicly available SRI funds (Pioneer Fund) used negative screening practices to exclude tobacco, alcohol, and gambling investments from its portfolio. Since then, socially aware practices have continued to evolve and recently take on a more mainstream focus by investors as ESG pillars become standard metrics of investment evaluations.

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