Passive Index Funds Continue to Outdraw Active Funds For Cash

&l;p&g;&l;img class=&q;dam-image getty size-large wp-image-1129564492&q; src=&q;https://specials-images.forbesimg.com/dam/imageserve/1129564492/960x0.jpg?fit=scale&q; data-height=&q;640&q; data-width=&q;960&q;&g; Passive index funds continued to bring in strong cash inflows at the expense of actively managed funds, said Morningstar&s;s 2018 Global Report on the fund industry.

Passive index funds continued to see strong cash inflows at the expense of actively managed funds. Index funds collected $695 billion last year, down from a record $962 billion in 2017, according to Morningstar&s;s 2018 Global Report on the fund industry. Long-term active funds lost $87 billion to outflows, the group&s;s first net outflows since 2008.

BlackRock and its iShares ETF unit, together continued to dominate flows with fund giant Vanguard.

Vanguard reported net inflows of $234 billion, for total assets under management (AUM) of $4.78 trillion as of December 31, 2018, said Morningstar. Blackrock and iShares pulled in $183 billion, bringing its AUM to $2.69 trillion

On the flip side, 2018 was a dismal year for active-oriented firms. The biggest loser was Franklin Templeton, which lost about $44 billion to outflows in 2018. Invesco and Dreyfus tied for second worst performance, with outflows of $23 billion each.

&q;Vanguard reclaimed the crown for top fund family flows, with $176 billion going to its long-term funds. BlackRock and iShares followed closely with a combined $167 billion. Fidelity came in a distant third with $24 billion, &q; said the report.

Written by senior analyst Kevin McDevitt and associate analyst Michael Schramm the report analyzes the flows that investors placed in global open-end funds and exchange-traded products in 2018, and what these trends reveal about investor preferences.

Last year, was the weakest for long-term funds&s; inflows since 2011, according to the report. Inflows plunged to $606 billion in 2018, from a record $2 trillion the previous year. The equity-market correction and investor concerns over credit markets caused many investors to move into money market funds, which had their best year since 2008, experiencing 7.8% growth, with inflows of $331 billion.

Investors still deposited $352 billion into equity funds last year, a little more than half 2017&s;s $604 billion. Despite the severe drop in equity prices in 2018&s;s fourth quarter, equity funds still had positive inflows of nearly $27 billion for the quarter. With all major geographic regions seeing significant equity inflows.

Meanwhile, bond fund investors turned skittish. They pulled $117 billion in the fourth quarter.

&q;Overall, bond funds collected $156 billion in 2018, a massive drop from 2017&s;s $891 billion. This was the group&s;s worst showing since 2013,&q; said the report.

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