Flows into active funds outpace passive funds for the first time in eight years

Investors in actively managed equity funds fared better than investors in passive equity funds in the second quarter — and even outperformed the S&P 500, according to a new report.

The report, published by Marlborough, Mass-based DALBAR, Inc., found that the average active equity fund investor contributed assets in April, May and June while the average equity index fund investor withdrew assets during each of those months.

According to DALBAR, April 2020 was the first month in eight years in which flows into active equity funds as a percentage of total assets exceeded flows into passive funds.

During the quarter, the average active equity fund investor earned 20.97%, outperforming both the S&P 500 (20.84%) and the average equity index fund investor (18.74%).

To date, investors in active equity funds have experienced average losses of –4.43% this year, compared to average losses of –5.55% for investors in equity index funds and a loss of –3.08% for the S&P 500.

DALBAR reported that all sector funds experienced outflows during the first half of the year, except for precious metals — which saw “significant inflows” — and technology funds. The consumer, financial and natural resources sectors saw the largest outflows.

A hypothetical average equity fund investor — including both active and index fund investments — who started the year with $100,000 (all figures U.S. dollars) would have withdrawn $1,714 by the end of June and lost an additional $5,028, ending the first half with a balance of $93,258, according to DALBAR.

Meanwhile, a hypothetical buy-and-hold investor who began the year with $100,000 and earned the same return as the S&P 500 would have lost $3,081 by the end of June, bringing their total to $96,919.

Staff

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