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Hip, Hip — but Not Hurray —for Active Funds

After huge outflows for two years, active funds squeezed out a small win in 2017.

  • By Julie Segal

Actively managed taxable bond funds attracted $179 billion from investors in 2017, the most popular active strategy tracked by Morningstar.

The research firm’s most recent statistics on the mutual fund industry show it was a relatively good year for active when put into context of the huge outflows that stock and bond pickers saw in both 2015 and 2016. Still, without taxable bond inflows, active funds would have lost $185.8 billion in assets.

“Taxable-bond funds were by far the most popular Morningstar category group in terms of active flows, demonstrating that an active manager’s skill in fixed income is still value,” Alina Lamy, the firm’s senior analyst in quantitative research, said in the report. Active equity funds have been losing assets every year since 2006.

While bond investors still see the importance of having a fundamental manager at the helm, active U.S. equity was the most unpopular category group, with $207 billion of outflows, according to the report. Investors are rebalancing from stocks to bonds and diversifying their equity allocations as the U.S. stock bull market enters its ninth year, Morningstar said.

[II Deep Dive: Morningstar: Vanguard Attracts More Money Than All Fund Managers Combined]

Overall, it was a record year for the fund industry, with inflows of $686 billion, the report shows. In December, Pacific Investment Management Co. and Dimensional Fund Advisors attracted the most assets among actively managed funds. Pimco brought in $3 billion, while Dimensional gained $1.7 billion. Vanguard Group continues to be the passive leader, with investors putting $22 billion with the fund company last month.  

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