That money quote comes from a Morningstar analyst looking at the incredible exodus from actively-managed mutual funds in June. The jig is up and investors are realizing that for a third of the cost they can buy passive funds and pretty much outperform everyone.
Jessica Toonkel has the story at Investment News:
U.S. investors pulled $19 billion more out of actively managed U.S. stock funds in June than they put in, while U.S. index stock funds saw $1.1 billion in net inflows. In March 2009, when the S&P 500 fell to a 12-year low of 676.53, flows out of active funds and into passive funds combined were $20.7 billion, according to Morningstar Inc. That month, investors pulled $18.3 billion out of actively managed U.S. stock funds than they put in, and passively managed equity funds saw $2.4 billion in inflows.
I’m not sure if the fact that these stats mirror my own actions for client portfolios should make me feel comfortable or uncomfortable. I find myself working with only a handful of active managers these days, most of which do something special that I simply cannot replicate with indexes or my own trading.
Anyway, there’ll be no joy in Boston as these numbers make the rounds in the mutual fund complex.