Passive eclipses active in US fund market as assets swell to $13.3tn

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Passively managed US mutual funds and exchange traded funds have for the first time amassed more money than their actively managed counterparts, thanks in large part to years of strong inflows into the increasingly popular ETF wrapper.

Article originally published by The Financial Times. Hargreaves Lansdown is not responsible for its content or accuracy and may not share the author's views. News and research are not personal recommendations to deal. All investments can fall in value so you could get back less than you invest.

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19 Jan 2024

At the end of December, passive US mutual funds and ETFs held about $13.3tn in assets while active ETFs and mutual funds had just over $13.2tn, according to data released by Morningstar. On net, active funds shed about $450bn last year. Passive funds took in about $529bn.

The ascent of passive strategies has been years in the making, beginning with Vanguard’s launch of the world’s first index mutual fund in 1976 on the premise that stock pickers do not beat the market over the long term.

A decade ago passive funds held about a quarter of the US mutual fund and ETF market, according to Cerulli Associates, a financial research firm. Despite occasional periods of outperformance, active managers have largely fallen short of passive counterparts in recent years.

Active assets remain about 70 per cent of the