Actively managed mutual funds in the U.S. have seen $76 billion worth of assets leave for greener pastures in the first five months of the year, according to the Investment Company Institute — except for one firm's offerings.
The standout performer in asset-gathering among active managers may come as a surprise: Vanguard Group Inc.
The firm's founder, Jack Bogle, has been perhaps the biggest champion of a passive approach to portfolio construction, or simply tracking a market index rather than seeking to beat it.
While such funds remain the firm's bread and butter, assets under active management at Vanguard now total around $1 trillion. As a result, Co-Head of Investment Grade Portfolio Management Gregory Nassour runs more money in the fixed-income space than former or current bond gods like Bill Gross or Jeffrey Gundlach.
Vanguard's ability to bring $28 billion into its actively managed mutual funds through the first half of this year — at a time when many of its competitors are seeing sizeable outflows — is the equivalent of swimming upstream, says Bloomberg Intelligence Analyst Eric Balchunas. These results fly in the face of two established industry trends for flows: money moving from active to passive management and from mutual funds to exchange-traded funds (ETFs).
The key to Vanguard's salmon-like abilities to collect assets are its fees. The company's actively managed mutual funds carry an average charge of 0.27% compared to 0.79% for peers.
"The whole story of the big sea change underway in money management isn't necessarily from mutual funds to exchange-traded funds or active to passive or human to robo-advisor — it's really about high-cost to low-cost," says Balchunas.
Vanguard, he says, is giving other actively managed mutual funds a blueprint of how to compete amid an ongoing shift towards lower-cost passively managed funds or ETFs.
