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April 18, 2019 at 03:16 PM
Last year active managers were met with outflows. In fact, in January 2019, Kevin McDevitt, a senior analyst at Morningstar, told ThinkAdvisor, “Money flowing out of active funds is not new, but the massive outflow in December is striking. $143 billion is a huge number, largest we’ve seen.”
But that was January. Today, “We believe it’s a great time to be an active manager,” stated Russel Kinnel, director of mutual fund research for Morningstar Research Services, in his piece, “What Trends Actively Managed Fund Flows Reveal.” He adds that today there is $11.7 trillion in actively managed funds, “a huge increase from the first quarter of 2009.”
Still, “there may be a reckoning,” he says, stating that in the trailing 12 months that ended in September, 66% of actively managed U.S. equity funds posted outflows. “That’s remarkable considering the tremendous bull market,” he wrote.
Another trouble sign for active managers: The move to passive from active “has been contained within domestic equity,” but in the third quarter of 2018, passive international-equity funds saw $19 billion in net inflows while the active side lost $15 billion in net outflows.
Kinnel adds that the new passive launches by Vanguard and Fidelity of zero-fee index funds might further hit active funds. “It could be a blip or a start of a trend,” Kinnel says.
