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| M42 Active Traffic Management (Photo credit: Highways Agency) |
So far in 2012, passively managed domestic-equity funds have trumped their actively managed rivals in more ways than one. In addition to outperforming--albeit by modest margins--in most areas of the U.S. stock market for the year to date through Aug. 6, index mutual funds and exchange-traded funds have enjoyed substantial net inflows so far in 2012, too. Meanwhile, actively managed funds as a group continue to hemorrhage assets. Through June, the broad universe of actively managed U.S. stock funds has shed nearly $50 billion in 2012, en route to what seems a certain sixth consecutive year of net redemptions. On the passively managed side, however, investors have sent more than $41 billion to domestic-equity vehicles so far this year.
When Will Active Be Loved?
Given the trajectory of recent asset flows, that's a question worth pondering not only for fund company executives who may fear for the health of their business models, but also for fund investors. Managing flows into and out of a fund comes with the territory for all money managers, of course. But when assets evaporate, persistently and in large sums, even topnotch stock-pickers can be hard pressed to avoid selling shares of companies whose fundamentals and valuations they still like. Even when managers are able to sell into strength, lackluster results can be tough to avoid, at least in relative terms. ... Continue to read.
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