Vanguard Group, whose name is synonymous with index funds,
gathered more money from investors in 2016 than the rest of the
asset management industry combined, according to preliminary
data from Morningstar.
Worldwide inflows for the fund manager totaled about $289
billion last year, surpassing the $244 billion attracted by the
remaining 4,000 global fund providers in its database, the
research firm estimates. Vanguard's edge over rivals is now
larger than ever, underscoring the soaring popularity of
passive investing since the 2008 financial crisis.
The firm, which created the
Standard & Poor's 500 stock index fund, has spent four
decades telling advisers, individuals, and institutions the
story of the long-term benefits of low-cost index funds. Since
the crisis, that story has been
particularly resonant as passive index funds have
outperformed many active managers.
The top three asset managers in 2016, including BlackRock
and State Street Global Advisors, were all in the index
business, according to Morningstar. Although investors withdrew
$92.3 billion last year from actively managed funds, index
funds dominated as an investment strategy, with inflows of
$625.2 billion. Of that, BlackRock's iShares exchange-traded
funds took in $137 billion, and State Street attracted $63
billion, Morningstar data show.
In 2015 investors' preference for passive investing was less
pronounced, with index funds attracting $571.1 billion,
compared with $284.9 billion of inflows for active
Whereas passive strategies are gaining momentum, active
managers remain much larger in terms of assets under
management, with a total $9.7 trillion in the U.S. at the end
of last year, according to Morningstar. Passive funds oversaw
$5.4 trillion. Still, Moody's Investors Service
predicts that assets managed by passive funds could eclipse
the amount overseen by active managers as early as 2021.