US active funds suffer record $143bn ‘exodus’ in December

Actively managed investment funds in the US experienced a record $143bn “exodus” in December, according to data, with many nervous investors flooding into cheaper passive funds.

Heaviest monthly outflows in 10 years as investors seek shelter in passive vehicles.

The shift mirrors experiences among UK active funds, which suffered consecutive months of outflows throughout 2018 while passive funds continued to attract assets.

The popularity of passive funds extended far beyond fixed income. In December alone passive funds took on $60bn in assets in the US. Throughout the year they had $458bn in inflows, following a record $663bn in 2017.

Passive assets under management globally have mushroomed since the financial crisis as investors embrace lower-cost options such as exchange traded funds, often at the expense of pricier active investments.

The surge has coincided with a period of underperformance by active managers and downward pressure on fund fees.

Morningstar data released in September revealed active fund managers in Europe had beaten their passive peers in only two out of 49 fund categories, in analysis covering a 10-year period to June 2018

At year-end actively managed funds controlled 61.2 per cent of the investment market in the US compared to the UK, where active funds account for 74 per cent of the market, according to the Investment Association.

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