Last December proved to one of the worst months on record for Wall Street since the Great Depression, as actively managed mutual funds experienced record outflows.
According to a Morningstar report, actively managed mutual funds experienced outflows of nearly $143 billion in December, their worst month ever. Falling a little short of 2016's total withdrawal of $320 billion, 2018’s record outflow clocked a total of $301 billion.
Morningstar senior analyst Kevin McDevitt remarked that December outflows extended to asset classes, with taxable-bond funds performing the worst. Active large-growth and large-value funds continue to get the hardest blow, likely losing assets to passively managed, core large-blend funds. Among active strategies, bond funds were hit the hardest in December with total outflow clocking $44.3 billion.
Investors appear to have shifted to passive strategies instead, as higher expenses of active management put extra pressure on their returns. Passive funds earned nearly $60 billion in new assets in December alone, according to Morningstar.
Passive strategies continue to gain popularity as the market for index funds has reached $6 trillion, while the market for exchange-traded funds has increased to $3.6 trillion in assets.