The passive train hit the brakes in 2018, as assets under management fell more than 3% against a backdrop of battered equity markets.
The 20 largest and top 500 money managers in the world also saw assets fall last year overall.
The Pensions & Investments and Willis Towers Watson Thinking Ahead Institute annual ranking shows passively managed assets fell 3.4% in 2018 to $6.21 trillion, following 25.8% growth in 2017 and a 8.9% increase in 2016.
"That, clearly, bucks the longer-term trend," said Bob Collie, head of research at the Thinking Ahead Institute in London. "The most likely explanation will be to do with asset allocation," because passively managed assets are relatively concentrated in asset classes that performed the weakest in 2018. "But the decrease is notable since it is unexpected," Mr. Collie added.
At the other end of the investment scale, active assets under management fell 3% to $15.14 trillion, following 15% growth in 2017 and 4% growth in 2016. Active and passive assets under management are based on a subset of money managers that have provided data for all years since 2014.
Mr. Collie also noted that hits to equity markets filtered through to the assets of the 20 largest money management firms in the ranking, whose assets fell 4.8% to $38.7 trillion as of Dec. 31. For the 500 largest managers, aggregate assets under management fell 3% in 2018 to $91.5 trillion.
"The single biggest factor would be market performance," Mr. Collie said. "When the index goes down, that causes assets to go down."
The MSCI All Country World index fell 9.4% in 2018, compared with a 24% gain the previous year. The Russell 3000 index lost 7% in 2018, compared with a gain of 18.9% in 2017. The MSCI Europe index lost 14.9% vs. a 25.5% gain the previous year; and the MSCI AC Asia Pacific Net Total Return U.S. Dollar index lost 13.5% in 2018, following a 31.8% gain in 2017.
The 10-year compound annual growth rate of the top 20 firms was 6.6%, outpacing that of the 500 largest managers at 5.5%. Over a five-year period, the CAGR for the top 20 was 4.3%, and 3.7% for the top 500 managers.
Across the top 500 managers, equity and fixed-income allocations continued to make up the majority of assets under management. Equities accounted for 43.6% of portfolios in 2018, down from 46.2% in 2017. Fixed-income's share of portfolios rose to 34.4% from 33.3% in 2017.
The remainder was made up of alternatives at 6%, up from 5.3% in 2017; cash at 7.7%, up from 7.2% a year earlier; and other investments at 8.3%, up from 8% in 2017.
All data in the survey are converted into U.S. dollars. The euro depreciated 4% against the dollar in 2018, but gained 14% in 2017. The pound sterling lost 6% against the dollar in 2018 after gaining 10% a year earlier. The Chinese yuan gained 5% against the U.S. dollar in 2018 and lost 7% in 2017, while the Japanese yen gained 3% vs. the dollar in 2018 and gained 4% in 2017.