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Fund Spy

Active Funds Are Dead. Long Live Active Funds.

Is low-cost really the "new past performance"?

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Key Takeaways

  • Recent reports suggest investors are fleeing active funds in droves, and not even successful active funds have been immune.
  • This is largely a phenomenon among active U.S. stock funds; in other asset classes, past performance still appears to strongly influence flows to active funds.
  • Among active U.S. stock funds, past performance appears to explain asset growth, even after accounting for fee differences.
  • Some successful active U.S. stock funds are likely seeing outflows as part of a larger structural shift toward indexing and wider diversification; this reflects broader currents, including changing advice practices.
  • Winning large-growth mutual funds account for a disproportionate share of outflows from successful active U.S. stock funds overall. 

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Jeffrey Ptak does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.