Passive Funds Preferred by Investors in December 2016

Long-term mutual funds and exchange-traded products (ETPs) experienced net redemptions of $1.7 billion in December, according to Strategic Insight, parent company of PLANSPONSOR and PLANADVISER.

Active and passive strategies continued to experience divergent trends in net investments. Passive funds led demand with $62.3 billion of inflows (including $45.7 billion to ETPs), while actively managed funds experienced aggregate net redemptions of $64 billion in December.

Taxable Bond funds experienced the most net deposits among long-term funds at $12.3 billion, a rebound from November’s outflows. Taxable Bond funds experienced net inflows in both passive and active segments, though passive funds brought in $10.0 billion compared to only $2.3 billion for active Taxable Bond funds. Tax-Free Bond funds in December experienced their greatest monthly net redemptions of 2016 at $16.3 billion.

Domestic Equity funds led Equity funds with $8.0 billion in net deposits, while International Equity funds saw outflows of $5.7 billion. Both segments experienced net redemptions for 2016 as a whole. Equity outflows were concentrated among active products ($48.8 billion) while passive Equity funds experienced inflows of $51.1 billion.

Growth & Income, which includes large-capitalization strategies, led inflows among ETPs in December, bringing in $22.4 billion. This represents the highest net inflows of any ETP objective in any month of 2016, surpassing the record total the objective achieved in November.