The year isn’t quite over, but Morningstar says 2014 is likely to be an extremely stellar year for passive mutual funds.
“A clear pattern has emerged this year concerning the U.S. equity Morningstar Category Group: consistent outflows on the active side and inflows on the passive side,” said senior analyst Alina Tarlea in a report released Friday. “Looking back over a trailing one-year period, active U.S. equity funds lost $91.9 billion, and passive U.S. equity funds received $156.1 billion.”
The notable exception to this overall trend in November, Tarlea point out, is the active taxable-bond group. It had inflows of $5.6 billion last month – surpassing the $5.3 billion of outflows the group had over the 12-month period.
“Two months after Bill Gross’ departure from PIMCO, it appears that fixed-income fears are dying down and investors are gaining confidence in other taxable-bond options,” the analyst said.
Nonetheless, passive taxable-bond funds have seen inflows of $9.1 billion in November and $97 billion over the past 12 months.
“On a three-month moving average basis, active taxable-bond flows are still showing up as negative. Passive taxable-bond funds experienced inflows for the 12th-consecutive month,” the Morningstar analyst said.
In the equity category, passive funds are pummeling their active counterparts.
Flows into passive equity funds reached $26.6 billion in November, Morningstar reports, and totaled $156.1 billion for the past 12 months. In contrast, active equity funds had outflows of $11 billion in November. They’ve experienced outflows of $92 billion since November 2013.
“Active U.S. equity experienced outflows for the ninth-consecutive month, and passive U.S. equity experienced inflows for the 10th-consecutive month,” according to Tarlea.
The dominance of active funds is, naturally, affecting flows into fund families
Vanguard had close to $19 billion of inflow in passive funds in November and $2.1 billion of active fund flows. For the past 12 months, Vanguard passive fund have experienced $187 billion of inflows.
Fidelity had outflows of $692 million from its active products in November and inflows of $1.5 billion into passive funds.
BlackRock/iShares’ passive funds brought in $15 billion of inflows, while active products attracted $2.1 billion; its passive funds have seen inflows of $76.3 billion in the past 12 months.
(Morningstar notes that most November outflows from the Fidelity Contrafund, Growth Company, and Low-Priced funds were due to the conversions of assets from the fund family’s open-end vehicle to the collective investment trust version of these strategies.)