Investors Withdraw a Record $143 Billion from Mutual Funds in December

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.