Active Management Still Key

Eighty-six percent, or $1.47 trillion of the $1.69 trillion invested in defined contribution (DC) plans—excluding what resides in lifecycle and money market funds—is invested in actively managed funds, with the remaining $226 billion in passively managed funds, according to data from Strategic Insight Simfund as of June 30. Despite all the noise about retirement plans turning en masse to passively managed funds, the data suggest that active management retains a critical role.

Among the actively managed mutual funds in DC plans, 55% of the assets are in U.S. equity funds. Twenty-five percent are in international equity funds and 20% in fixed income.

On the passively managed side is an even greater weighting toward U.S. equity funds, with 75% of the assets invested there. This may be because many retirement plan participants and the managers of target-date funds use U.S. equity index funds as their core holdings. Another 15% of passively managed funds is in international equity funds, and 10% is in fixed income.

The Trailing 12 Months

Although, for the trailing 12 months as of a year ago June 30, the flows into actively managed and passively managed funds were essentially evenly split, for the trailing 12 months ending this June 30, investors resoundingly favored actively managed funds, with $56.2 billion going into them, and a mere $2.2 billion moving into passively managed funds.

Looking at the individual quarters, actively managed funds held their own in each, with the greatest amount, $15.9 billion, being poured into the funds in the first quarter of this year. In fact, passively managed funds saw outflows of $60 million in the third quarter of last year and $2.9 billion in the fourth quarter.