Industry Updates

Morningstar: US investors go passive for equity but remain active for fixed income

George Geddes

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US investors are shifting to passive strategies when it comes to equity products as active funds suffered significantly large outflows in July, according to Morningstar’s July Fund Flows report.

In tandem with active funds’ large equity outflows last month, fixed income received a large volume of inflows for both passive and active funds, but more so in the latter.

US equity active funds saw $23.5bn outflows in July as its passive counterparts received $6.6bn inflows. Across the pond, the UK's active funds are struggling to compete with passive as half have closed in the last decade.

Taxable bond funds, both active and passive, received a total of $40.2bn for the month, two thirds of which came from active funds. This was a similar story for municipal bonds which pulled in $10bn, but active funds accounted for over 90% of the inflows.

Vanguard bounced back from its underwhelming inflows in June as it topped the table in July. Its cheap passive strategies pulled in $11.7bn for the month, bringing its total assets under management to $4.9trn.

Passive and active US equity funds reach parity

State Street’s SPDR, PIMCO and Fidelity Investments also saw their passive funds do well as they pulled in $8.2bn, $2.8bn and $2.3bn, respectively.

BlackRock’s iShares, however, had a disappointing month as its passive funds suffered $4.3bn in outflows as well as its active funds only pulling in $90m. Its iShares Russell 1000 Value ETF and iShares Russell 1000 Growth ETF suffered outflows worth $4.9bn and $3.9bn, respectively. This resulted in its total 12-month flows to fall to $144.2bn, behind Vanguard with $161.1bn.

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