U.S. Passively Managed Funds Outdraw Actively Managed Funds In 2019

In 2019, U.S. fund investors continued to prefer passively managed funds over actively managed funds. Long-term actively managed funds (excluding money market funds) witnessed net outflows of $83.7 billion for 2019, while their passively managed counterparts took in some $472.1 billion.

However, assets under management for long-term funds remain tilted toward actively managed products. At the end of 2019, actively-managed funds accounted for $13.9 trillion under management in the U.S., while their passively managed fund brethren made up $8.4 trillion. Money market funds—$3.5 trillion—comprised the remainder of assets under management in the U.S. fund industry—$25.9 trillion.

I know, the headlines in the mainstream media have stated that assets in passively managed funds surpassed those in actively managed funds and this is true for domestic equity funds (comprised of U.S diversified equity funds, sector equity funds, commodity funds, and alternatives funds), but not on the world equity funds, mixed-assets funds, taxable fixed-income funds, or municipal bond funds side of the universe. On December 31, 2019, total net assets (TNA) under management in passively managed domestic equity funds were $5.4 trillion, while their actively managed counterparts were $5.2 trillion. However, in the remaining macro-groups in the table below, actively managed funds’ TNA still handily outpaced their passively managed funds cousins’ TNA.

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Despite the stellar returns of equity funds for 2019—with the average equity fund posting a decade’s best 24.04% one-year return—investors turned a cold should to equity funds (excluding mixed-assets funds), withdrawing a net $123.8 billion for the year, with actively managed equity funds handing back a net $355.6 billion. Meanwhile, passively managed equity funds took in $231.8 billion. There was not a one-for-one move from actively managed funds to passively managed equity funds/ETFs.

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