According to data from Morningstar, actively managed funds experienced outflows of nearly $143 billion in December, their worst month ever.
Last month was one for the Wall Street history books — not only was it stocks’ worst December since the Great Depression, but it now appears to be a pivotal moment when investors really gave up on active management.
According to data from Morningstar out Thursday, actively managed mutual funds experienced outflows of nearly $143 billion in December, their worst month ever. The record exodus brought the yearly outflows to $301 billion, just shy of 2016’s $320 billion.
“December outflows spanned asset classes, with taxable-bond funds faring worst. [Active] large-growth and large-value funds continue to get hit the hardest, likely losing assets to passively managed, core large-blend funds,” Morningstar senior analyst Kevin McDevitt said in a note on Thursday.
Investors, at the same time, fled to cheaper passive strategies amid the brutal sell-off, as the higher expense of active management put extra pressure on their returns. Passive funds reeled in nearly $60 billion in December alone, according to Morningstar.
Among active strategies, bond funds bled the most in December with $44.3 billion outflows, the data showed.
“This is notable because taxable-bond funds had been a rare bright spot for active managers. But as investors pulled money in 2018’s fourth quarter, it came almost entirely from active taxable-bond offerings … while they were essentially flat for passive vehicles,” McDevitt said.
Passive strategies continue to gain popularity as the market for index funds has reached $6 trillion, while the market for exchange-traded funds has ballooned to $3.6 trillion in assets.
The indexing industry on Wednesday lost one of its most prominent figures . Jack Bogle, founder of Vanguard Group and creator of the world’s first index mutual fund, the First Index Investment Trust, died at age 89.