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Commentary

Passive U.S. Equity Funds Lose Fans in March

Active U.S. equity funds experienced outflows for the month, too, as investors directed dollars to taxable-bond and international-equity funds instead.

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With the S&P 500 logging its first negative quarter since 2015's third quarter, investors pulled more than $21 billion from U.S. equity funds. With positive but slowed flows into taxable-bond and international-equity funds, overall long-term flows were nearly $13.4 billion in March. Money market funds had nearly $55 billion in outflows.

Strikingly, U.S. equity outflows were almost evenly divided between actively and passively managed funds. Active outflows were nearly $11 billion, while passive outflows were not far behind at about $10.6 billion. March was also the second consecutive month of passive equity outflows. Before March, passive U.S. equity funds hadn’t had outflows since April 2015. Nevertheless, these outflows don't necessarily reflect a broad trend. That's because the lion's share of outflows emanated from just two ETFs.  SPDR S&P 500 ETF (SPY) had a whopping $15 billion in outflows and  iShares Core S&P 500 ETF (IVV) followed with nearly $9.7 billion in outflows.

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Kevin McDevitt has a position in the following securities mentioned above: IVV. Find out about Morningstar’s editorial policies.