Equity strategies experienced a noticed decline in U.S. institutional tax-exempt assets last year — a trend felt by both active and passive money managers alike, as neither were exempt from losses caused by a rocky market in 2018.
Assets in active domestic equity strategies dropped 13.9% to $2.32 trillion over the year ended Dec. 31, data from Pensions & Investments' annual survey of the largest money managers found. Meanwhile, passively managed U.S. equity strategies saw an 18.8% decline in assets during the same time period, reporting $2.17 trillion in combined AUM across firms.
Domestic equity products represented the largest share of AUM in equities strategies in the survey.
In 2018, indexing giants Vanguard Group Inc., BlackRock Inc., and State Street Global Advisors were, respectively, the top three money managers as ranked by U.S. institutional tax-exempt assets in passively managed U.S. equity strategies. All but Vanguard, however, experienced noticed asset declines over the year.
BlackRock saw its U.S. institutional tax-exempt assets in passive U.S. equity drop 12.3% to $569.7 billion, and SSGA's assets in this universe dropped nearly 15% during the year to $263.8 billion.
Vanguard's assets in this channel declined only slightly, down 1% to $839.3 billion as of Dec. 31, according to P&I's survey data.
Despite the investor shift to lower-cost passive strategies in recent years, indexed strategies were met with significant asset declines in 2018, including enhanced index domestic equity, which lost 26.2% of assets over the year, with $72 billion in assets as of Dec. 31.
Of note, Geode Capital Management LLC, Boston, did not break out its equity assets for the survey, which contributed to lower asset levels across indexed strategies compared to 2017. Excluding Geode from 2017 comparisons, passive U.S. equity was down 9.1% in 2018 and enhanced index U.S. equity assets were down 19.8%. Geode reported $321 billion in passive U.S. equity institutional tax-exempt internally managed assets as of June 30, 2018, according to P&I's previous index manager survey.
Passive international equity strategies, with $471.5 billion in assets, and enhanced index international equity strategies, with $18.4 billion in assets, each lost 18.6% of AUM during the period, survey data found (down 14.3% and 14.9%, respectively, excluding Geode).
During 2018, the MSCI ACWI ex-U.S. index returned -14.2%.
Among the top three managers of active U.S. equity assets, T. Rowe Price Associates Inc., Baltimore, oversaw the most in internally managed assets for U.S. institutional tax-exempt, with $379.2 billion in assets as of Dec. 31, up 1.95% from a year earlier. Fidelity Investments, Boston, was No. 2, but saw its assets drop 11.4% to $284.2 billion during the same period. The third-largest manager was Capital Group Cos., Los Angeles, which only saw a 1.74% decline in active U.S. equity assets, reporting $240.7 billion.