Investors shun stock pickers, favor Vanguard, BlackRock, State Street

Fund sales switch decisively toward plain-vanilla, index investing, move out of Pimco Total Return has big impact on flows.
APR 13, 2015

If you have an interesting investing idea, try calling Warren Buffett or Bill Ackman, because mutual fund investors just aren't that into you.

In yet another symbol of changing investor appetites, actively managed U.S. stock funds have now completely fallen off the list of the industry's top products.

Of the 25 best-selling mutual funds (and exchange-traded funds) in the U.S., not one employs a portfolio manager to pick U.S. stocks, according to a list by Morningstar Inc. for the 12 months ended Feb. 28.

Top selling funds ranked by net flows

Source: Morningstar Inc. estimates

Note: 12 months ended Feb. 28

But it's not just stock pickers who are losing their slots, it's the firms they work for as well. Thirteen of those 25 top funds are managed by the Vanguard Group Inc., now the nation's top mutual fund company. Other managers making the list include top index-tracking ETF sponsors BlackRock Inc. and State Street Corp. The only actively managed funds currently in the top-seller list do not involve U.S. stocks and benefited from a historic tailwind, the reallocation of money in bond funds after the September 2014 departure of Pacific Investment Management Co.'s co-founder Bill Gross and the largest series of mutual fund redemptions in history. The seven, actively managed funds in the top 25 include six bond funds that won business as investors pulled $120 billion from the Pimco Total Return Fund (PTTAX), such as the Metropolitan West Total Return Bond Fund (MWTIX), the Dodge & Cox Income Fund (DODIX) and the BlackRock Strategic Income Opportunities Fund (BASIX). The seventh actively managed fund to make the list is an international stock fund managed by Dodge & Cox. It's not that investors are afraid of the U.S. stock market after its steady march upwards over six years. In the period that actively managed stock funds have suffered, losing $120 billion over the last year, investors have poured $219 billion into comparable index funds, according to the data. “You've seen investor interest in passive products, and that's been a trend for a while,” said Vincent Loporchio, a spokesman for Fidelity Investments, in an interview earlier this year. “We believe that's a cyclical trend.” On the other side of the ledger, all but two of the bottom 25 funds are actively managed. The two index trackers that land on that list are the PowerShares QQQ (QQQ) and the iShares 1-3 Year Treasury Bond (SHY). Judging by flows, investors choosing active management right now are looking for specialized expertise. Where passive alternative funds took in $4 billion, their actively managed counterparts took in $10 billion. Index-tracking municipal bond strategies won $4.6 billion, but actively managed versions hauled in $34 billion. And allocation strategies, such as target-date funds, continue to command more assets than index-tracking versions, which are relatively newer. Those are the only areas where active tops passive, at least when it comes to sales. In stock and bond funds, international and domestic, ETF and index-fund wholesalers have been beating their cousins on the other side of the aisle.

Latest News

Advisor moves: Atlas tops $1B as Wells Fargo, UBS add bank veterans
Advisor moves: Atlas tops $1B as Wells Fargo, UBS add bank veterans

Wells Fargo adds two bank-channel recruits, UBS lands a JPMorgan Chase veteran, and a multi-family office lifts Atlas past $1B

Advisor mom’s son used her password to log into clients’ accounts, sell deal with conflicts, according to Washington state
Advisor mom’s son used her password to log into clients’ accounts, sell deal with conflicts, according to Washington state

“The state comes down on you in years when you make 40% returns for clients,” said Bill Swayne, the advisor and son of Candace Swayne.

Osaic in talks with Anthropic as AI reshapes advisor workforce
Osaic in talks with Anthropic as AI reshapes advisor workforce

The Independent broker-dealer giant has had “active conversations” with the Claude maker, which is days away from its expected IPO

The retirement milestone advisors aren't tracking
The retirement milestone advisors aren't tracking

For Gen X clients entering life after work, answering the financial question isn't enough to solve the entire retirement equation.

Wealthtech firms target stock pay, pensions and heirs for advisors
Wealthtech firms target stock pay, pensions and heirs for advisors

Tools from Grantd, Income Lab and Healthspan Wealth aim to keep RIAs involved in clients’ biggest money decisions

SPONSORED Best Practices for Engaging Women Around Alternatives

Growing wealth, evolving priorities, and untapped opportunities are reshaping how women approach long-term investing.

SPONSORED Built on insurance experience to deliver on long-term promises

Knighthead Life entered the market with a competitive MYGA. A strong launch earned advisor confidence and paved the way for FIAs.