2014.07.2807:31:20UTC+00More investors getting into passive funds

Growing confidence in the strong showing of the global economic recovery is pushing investors to replace their cash with allocations in passive funds for equities, bonds, and other new assets.

Among those who garnered greater attention is a variety of mutual funds with those that track fixed income earning the highest inflow of money during the first six months of the year. Bond funds’ new money during that time totaled $273 billion and was followed by the $229.9 billion received by equity funds and the $130 billion of fixed assets funds. On the other hand, money market funds took a hit by registering an outflow of $112 billion, reflecting the loss of appeal cash proxies have had.

In 2013, equities recorded the highest inflow with $272.4 billion while bonds had $211.8 billion. Money market funds also had an outflow then in the amount of $132.7 billion.

By taking their money out of safe but lower yielding cash and into bonds, investors are indicating greater confidence in the market. Another factor of passive funds could be a preference to stay away from the expensive fees of active managers which do not guarantee a better performance than cheaper funds.

Chief investment officer for Vanguard Jeff Molitor says that, “Investors like passive funds because they are cheaper and over the long run offer better performance than active funds. There are some good active managers out there, but they are very difficult to find.”