Passive funds now hold $60bn more in AUM than active funds

Assets in passive funds have exceeded the AUM in active funds for the first time ever, according to Morningstar’s latest US fund flows report.

Passive funds and ETFs ended 2023 with $13.293tn in AUM, while active funds had $13.234tn, a $59bn difference.

At its peak in 2021, active funds held $15.4tn. That year, passive funds had $12.5tn in assests, the second highest their AUM had ever been.

The gap between active and passive funds has been closing for several years. Barring 2021, active funds and ETFs combined have been in consistent outflows for the last nine years. Over that same time, however, investors poured $4.8tn into passive funds and ETFs. Meanwhile, in 2023, active funds and ETFs shed about $452bn, while passive strategies took in $538bn.

The top three funds with the highest inflows for the year were all passive strategies: the $497bn SPDR S&P 500 ETF Trust (SPY), the $372bn Vanguard S&P 500 ETF (VOO) and the $399bn iShares Core S&P 500 ETF (IVV) which netted $50.9bn, $42.2bn and $37.7bn respectively. Coming in at number eight, the active fund with the largest inflows for the year was the $72.7bn JPMorgan Large Cap Growth fund (SEEGX), which took in $16.6bn.

This move towards passive has also proved to be a move towards ETFs as investors have begun to prefer passive over active, according to the report. Over the last five years, index ETFs had $2.5tn in inflows while passive open-end funds collected only $386bn. In 2023, passive mutual funds took in $66.5bn, while their ETF counterparts netted about $470bn.

While active funds seem to be out of favor currently, active ETFs are on the rise. Although active mutual funds shed $576bn in 2023, active ETFs actually netted about $129bn. Despite representing only 5.3% of the ETF market at the beginning of last year, 21.9% of overall ETF flows for the year went into active ETFs, per Morningstar. This is a hefty increase from 2022, when active ETFs took in $89bn, roughly 15% of all ETF flows.

Moreover, of the 530 new ETFs brought to market in 2023, 73% were active; 10 years ago, active ETFs accounted for only 16% of new launches.

The original article can be found on Citywire


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