Index funds have record year as passive wins over active

$115B in flows nearly double previous high; active takes in just $38B

Jan 31, 2014 @ 6:59 am

U.S. investors embraced passive investing in 2013 by pouring a record $115 billion into index mutual funds, almost double the previous high.

Investor deposits into benchmark-tracking funds outstripped the $38.3 billion gathered in 2013 by actively managed mutual funds, according to data compiled by the Investment Company Institute. The previous high for index funds was $61.1 billion in 2007, the data show.

Investors have turned increasingly to index-based vehicles, especially those that track broad market benchmarks such as the S&P 500. Exchange-traded funds in the U.S., most of which follow an index and are popular with both retail and institutional investors, took in $180 billion in 2013, according to the ICI.

Investors saving for retirement through 401(k) plans most probably drove the bulk of the deposits into index funds, Tim Buckley, chief investment officer at The Vanguard Group Inc., and John Sturiale, head of propietary investment products at The Charles Schwab Corp., said in separate interviews. ETFs are not available in most 401(k) plans.

ICI data on ETFs doesn't include exchange-traded notes.

(Bloomberg News)

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