Market Trends Copy

Passive US equity funds have finally surpassed active US equity funds in assets under management. By the end of August, passive US funds had total net assets of $4.27 trillion, compared with $4.25 trillion in active US equity funds, according to data provided by Morningstar.

Morningstar data also showed that for the year to August 31, 2019, US equity funds had $88.9 billion in inflows, while their active counterparts had $124.1 billion in outflows. This landmark event has been all but inevitable for some time. At the end of April, passive US equity funds had assets of $4.305 trillion compared to $4.311 trillion in active equity fund assets.

Based on this data, Morningstar’s analysts predicted in May that parity was imminent, a claim they walked back the following month. ‘We jumped the gun last month in declaring asset parity between active and passive US equity funds,’ said Morningstar senior analyst Kevin McDevitt and data journalist Gabrielle DiBenedetto at the time. McDevitt and DiBenedetto author Morningstar’s monthly flow report.

By June, passive US equity funds hadn’t yet pushed past their active counterparts, which had just $89 billion more in assets. However, passive funds reached 40% of the market share across asset classes in June, and had almost $69 billion in net inflows. This month’s milestone marks an industry shift that could have a further impact on asset managers.