Markets are volatile and investors are nervous, thanks to the Brexit vote in the U.K. and the American presidential horse race. Amid all the uncertainty, the three big advantages of passively managed exchange-traded funds — they're cheap, flexible and tax-efficient — continue to drive the migration of investment assets from actively managed mutual funds to ETFs.
Many industry observers had expected that increased market volatility would push investors back to active managers, but the latest asset-flow stats from research firm Morningstar suggest not. In May, $18.7 billion flowed out of actively managed U.S. equity funds and $8.1 billion flowed into passively managed ones that track an index — largely ETFs.
In the last year, all categories of long-term active funds lost a staggering $308 billion, while passive funds (again, largely ETFs) attracted $375 billion.