Active Funds Routed in November as Investors Go for Indexes

(Bloomberg) -- Stock and bond pickers took another hit last month from investors.

Investors pulled $67 billion from active mutual funds while adding $70.6 billion to passive funds in November, the most for each category this year, according to data compiled by Morningstar Inc.

The shift, which has been underway since the financial crisis of 2008, is being driven by investors who are unhappy with the cost and performance of active funds. In the five years ended June 30, only 8 percent of large-cap stock managers beat their benchmarks, according to S&P Dow Jones Indices.

In November, active stock funds suffered redemptions of $36.5 billion and active bond funds lost $21.8 billion, with the remainder of outflows from other types of investments such as balanced funds. Many bonds lost value following the election of Donald Trump as traders bid up interest rates on the expectations that a Republican administration and Congress would pursue policies that could boost growth and inflation.

The change in investor preference has affected even firms with a long-history of successful stock picking such as Boston-based Fidelity Investments. The Fidelity 500 Index Fund became the firm’s largest stock fund in November, passing the previous leader, Fidelity Contrafund, run by William Danoff.

Morningstar’s data includes mutual funds and exchange traded funds.

To contact the reporter on this story: Charles Stein in Boston at cstein4@bloomberg.net.

To contact the editors responsible for this story: Margaret Collins at mcollins45@bloomberg.net, Alan Mirabella