FUND FLOWS SPOTLIGHT Passive U.S. Equity Funds See First Outflows Since 2015 With the S&P 500 logging its first negative quarter since 2015, investors pulled more than $21 billion from U.S. equity funds. Strikingly, these outflows were almost evenly divided between actively and passively managed funds. Before February, passive U.S. equity funds hadn't had outflows since April 2015. These outflows don't necessarily reflect a broad trend: The lion's share came from just two exchange-traded funds: SPDR S&P 500 ETF SPY and iShares Core S&P 500 ETF IVV. In contrast, Vanguard Total Stock Market ETF VTI had $4.6 billion in inflows. Outflows from SPY and IVV may simply reflect their use as tactical allocation vehicles. Somewhere, Jack Bogle is shaking his head. Kevin McDevitt is a senior analyst with Morningstar Research Services. Passive U.S. Equity Flows Positive Negative $60M 50 40 30 20 10 0 -10 -20 04/2015 08/2015 12/2015 04/2016 08/2016 12/2016 04/2017 08/2017 12/2017 Source: Morningstar. Data as of 03/31/2018. Active Versus Passive Fund Strategies The percentage of U.S. actively managed funds that outperformed their respective Morningstar Style Index. < 20% Index Returns (04/30/2018) 9.1 53.3% 9.0 33.5% 17.8 80.2% 2.5 66.4% 7.3 33.8% 19.0 Core Growth 8.8 23.3% 10.1 17.4% 13.4 4.1% 10.5 33.3% 7.9 47.6% 8.6 67.9% 6.6 41.7% 8.4 39.2% 10.4 Value Core Growth 48.9% 10.2 26.4% 12.5 12.0% 16.3 2.3% 13.1 17.7% 11.9 38.2% 12.4 53.1% 9.6 35.1% 11.2 12.4% 12.9 Value Core Large 32.4% 24.4% Mid 23.4 Large 19.1% Mid 9.0 Small 82.4% Large 9.4 5-Year Mid 3-Year 51.5% Value > 40% Small 1-Year 20 to 40% Small Percentage of Actively Managed Funds Outperforming Index: Growth global.morningstar.com/Morningstarmagazine 111http://global.morningstar.com/Morningstarmagazine