PLANADVISER - November/December 2020 - 4

data points //
Active vs. Passive Strategies
Which way have investors moved in this recession?
A
fter nearly 11 full years of
economic growth, which peaked
in February, the National Bureau
of Economic Research said the economy
officially entered a recession on June 8.
Passive funds have received considerable
attention-and inflows-in
retirement plans as their sponsors stay
focused on reducing costs. The 2020
PLANSPONSOR Defined Contribution
(DC) Survey indicates 79% of sponsors
offer indexed/passive investments on
their plan menu; these funds, however,
frequently appear
alongside
active
management options.
Often investment managers make
the case that actively managed funds
perform better in periods of market
volatility and decline, lessening the
swing on the downside, and that
passively managed funds do well
during bull markets.
How is the active/passive debate
reflected in the first three quarters
of 2020? According to MI Simfund, a
platform of PLANADVISER's parent
company ISS, the market's forwardlooking
nature often appears at conflict
with the day's news. Asset-weighted
fund performance underlined the
disconnect between recovering markets
and a lagging economy. Active U.S. and
international equity funds recorded
marginally better downside protection
than did index funds across the first
quarter and slightly better outperformance
in the second. Passive domestic
equity funds
conversely led performance
across the third quarter.
Despite
the
rebound
in
equity
markets, bond funds overwhelmingly
led inflows from the second quarter
of 2020 onward. Within active funds,
this served as a return to trend. The
asset
class
has
been
the
leading
active segment for multiple years
and witnessed a pullback in the first
quarter. In a sharper reversal from
long-term activity, passive U.S. equity
funds faced sharp outflows across the
second and third quarters. -PA
Index Funds
U.S. equity
International equity
Taxable bond
Tax-free bond
Q3 '20
5,377,619
1,413,582
1,701,128
54,415
8,546,744
20,401,960
Source: ISS MI Simfund
Q1 '20
50,225.2
33,140.9
-39,803.6
612.5
44,174.9
-225,171.9
Q2 '20
-32,725.4
-22,994.6
100,786.5
3,480.2
48,546.8
79,146.5
Q3 '20
-36,560.5
10,833.7
81,896.6
3,069.3
59,239.1
83,098.5
2020 Cumulative Returns, Q1-Q3
Cumulative
Total Return %
Active Funds
U.S. equity
International equity
Taxable bond
Tax-free bond
Index Funds
U.S. equity
International equity
Taxable bond
Tax-free bond
Returns are asset-weighted
2020 Asset Flows, Q1-Q3
Total Assets
$mm (SI)
Active Funds
U.S. equity
International equity
Taxable bond
Tax-free bond
Q3 '20
5,547,785
2,355,269
3,106,796
845,365
11,855,216
Net New
Flows $mm (SI)
Q1 '20
-106,631.6
-25,659.0
-116,759.6
-20,296.6
-269,346.8
Net New
Flows $mm (SI)
Q2 '20
-33,569.3
-45,576.0
95,953.2
13,791.8
30,599.8
Net New
Flows $mm (SI)
Q3 '20
-98,857.0
-29,303.9
124,484.3
27,536.0
23,859.4
Q1 '20
-0.19%
-0.22%
-0.03%
-0.02%
Q1 '20
-21.12%
-23.85%
1.66%
-0.95%
Cumulative
Total Return %
Q2 '20
21.83%
20.07%
5.70%
2.68%
Q2 '20
21.79%
18.26%
3.58%
2.50%
Cumulative
Total Return %
Q3 '20
8.17%
8.20%
1.94%
1.32%
Q3 '20
8.50%
6.66%
1.05%
1.02%
4 | planadviser.com November-December 2020
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PLANADVISER - November/December 2020

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