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  Passive vs. Active Fund Flows
Posted Under: Conceptual Investing
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View from the Observation Deck

Investors directing capital into U.S. mutual funds and exchange traded funds (ETFs) continued to favor passive investing over active management for the 12-month period ended 3/31/24.

Passive mutual funds and ETFs reported estimated net inflows totaling $620.78 billion for the 12-month period ended 3/31/24, while active funds reported estimated net outflows totaling $376.91 billion over the same period. The top three active categories with net inflows over the past 12 months were Taxable Bonds, Nontraditional Equity, and Alternative, with inflows of $77.38 billion, $20.47 billion, and $11.33 billion respectively (see table above). For comparison, the top three passive categories were U.S. Equity, Taxable Bond, and International Equity, with inflows of $323.17 billion, $217.13 billion, and $76.04 billion, respectively.

Despite compelling total returns in the broader equity markets, equity mutual funds and ETFs experienced net outflows over the past 12 months, while fixed income mutual funds and ETFs saw inflows.

Combined, the active and passive equity categories experienced outflows of $40.86 billion for the 12-month period ended 3/31/24. For comparison, the Taxable and Municipal Bond categories reported net inflows totaling $294.68 billion over the same time frame. The S&P 500, S&P MidCap 400, and S&P SmallCap 600 Indices posted total returns of 29.86%, 23.29%, and 15.83%, respectively, for the 12-month period ended 3/28/24, according to data from Bloomberg. With respect to foreign equities, the MSCI World (ex U.S.) and MSCI Emerging Market Indices posted total returns of 15.18% and 7.86%, respectively, over the same time frame.

Takeaway: Passive mutual funds and ETFs saw inflows of $620.78 billion compared to outflows of $376.91 billion for active funds over the trailing 12-month period ended 3/31/24. In the table above, we observe the largest disparity occurred in the U.S. Equity category, with active shedding $276.69 billion compared to inflows of $323.17 billion for passive funds. Notably, despite compelling total returns in the broader equity markets, equity funds suffered net outflows of $40.86 billion over the trailing 12-month period. For comparison, the fixed income categories saw combined net inflows of $294.68 billion over the same time frame. To view the last time we updated this post, please click here.

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is an unmanaged index of 500 companies used to measure large-cap U.S. stock market performance. The S&P MidCap 400 Index is a capitalization-weighted index that tracks the mid-range sector of the U.S. stock market. The S&P SmallCap 600 Index is a capitalization-weighted index that tracks U.S. companies with a small market capitalization. The MSCI World (ex U.S.) Index is a free-float weighted index designed to measure the equity market performance of developed markets. The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets. 

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Posted on Thursday, April 18, 2024 @ 1:42 PM • Post Link Print this post Printer Friendly

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
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