Actively managed strategies are still seeing inflows, but the bulk of that institutional capital is going only to a small number of managers — and strategies.
Pensions & Investments' data show managers held $7.1 trillion in internally managed U.S. institutional tax-exempt assets in active equity and fixed-income strategies as of Dec. 31. Of the managers reporting actively managed assets, the 25 largest held nearly two-thirds — 65.2% — of the assets.
Meanwhile, data from Morningstar Inc. show total net inflows into active U.S. equity mutual funds totaled $142.03 billion over the three years ended Dec. 31, 2016. Of those flows, 78% went to the top 25 managers on that list.
J.P. Morgan Asset & Wealth Management topped Morningstar's list, receiving $19.47 billion in inflows into those actively managed U.S. equity funds.
“We continue to see slow steady growth each year,” said James Peagam, New York-based head of North American institutional asset management at J.P. Morgan. Increased market volatility in the past six months has helped build the case for actively managed strategies, he said.
“We don't think it needs to be one or the other, by the way, so I think there is a home for both active and passive in portfolios,” Mr. Peagam added.
Macquarie Investment Management also is seeing heavy inflows within its active strategies. According to Morningstar, the firm received $8 billion in net inflows into its active U.S. equity funds over three years ended Dec. 31.
Shawn K. Lytle, head of Macquarie Investment Management, Americas, and president of Delaware Funds, said he feels “very fortunate” that Macquarie has attracted investors who still want active management, “since that's not the trend for most of our peers.”
Investors are being more selective in allocating to active managers that can complement good beta or passive management, Mr. Lytle said. “Generally, any strategy that is broadly just giving you benchmark-like returns are seeing negative flows these days,” he said. “Having an investment process that is indistinct from providing benchmark returns is not going to cut it.”