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Passive equity gets a jolt in Q4, still a falling knife

Passive equity managers upped their share of the institutional mutual fund market to 40.5% year-to-date Nov. 30 vs. active funds, from 35.2% at the end of 2017. Much of that increase was won in October when passive equity managers took in $30.7 billion as active managers saw $28.9 billion walk out the door. Through the first 11 months of 2018, passive funds had net inflows of $84.7 billion while active funds had net outflows of $12.5 billion.

Until July, active funds were doing relatively well with net inflows peaking at $37.4 billion; passive inflows were just ahead at $41.6 billion. October's market declines spooked investors out of active and drove many to buy the dip in the form of index funds, erasing active's asset gains in the first nine months of the year. Since Sept. 30, the S&P 500 – the most common passive equity proxy – is down 12.3% through midday Tuesday.