Fidelity Investments Has $40B Outflows From Actively Managed, $50B Inflows to Passive Funds: Morningstar

February 1, 2018 — 1:44 PM EST

Mutual funds and exchange-traded funds (ETFs) saw massive inflows in 2017, with passive funds leading the charge and Vanguard and BlackRock, Inc. (BLK) clear winners, according to Morningstar data. Fidelity Investments also saw billions of dollars pour into its passive funds, but when it came to actively managed mutual funds, Fidelity was a clear loser.

According to a Morningstar report, Fidelity Investments had outflows of $40 billion from its actively managed funds, leading the fund companies that saw outflows in that area of investing. The Boston-based firm did have $51.3 billion of inflows into passive funds during 2017, underscoring the movement on the part of investors to shun actively managed mutual funds, which typically have higher fees and expenses associated with them. Pimco, which had $33 billion of inflows in its actively managed funds, was the winner on that front. In passive investing, Vanguard had inflows of $328 billion – almost half of all inflows for 2017 – while BlackRock came in second place with $213 billion in inflows, Morningstar found.

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All told, inflows into mutual funds and ETFs hit $684 billion in 2017, with actively managed funds breaking even last year. Morningstar called that a bit of a victory given "extreme" outflows in both 2015 and 2016. Without taxable bond inflows, however, Morningstar said that active funds would have seen outflows of $185.8 billion last year.

While Fidelity suffered from outflows on its actively managed funds, investors who stuck with those funds last year were rewarded, even if the investment vehicles are out of fashion. According to an earlier Morningstar report, after years of posting disappointing results, Fidelity's actively managed mutual funds showed signs of improvement in 2017, excluding the flagship Fidelity Magellan Fund.

Morningstar pointed to the Fidelity Contrafund, Fidelity Low-Priced Stock Fund, Fidelity Growth Company Fund, Fidelity Blue Chip Group Fund and Fidelity OTC Fund, all of which did better than their peers. These funds not only beat their rivals – they came out as the top funds in their groups. What's more, Morningstar said that Fidelity's major U.S. stock funds beat their index rivals, in some cases by a lot.

"Of course, one year isn't very long," wrote Morningstar research analyst John Rekenthaler in a recent report. "Fidelity's stock funds would need to outdo the indexes for three years at the very least to qualify as long-term successes, and their record during that time period is decidedly more mixed. Even with their powerful 2017 showings comprising the final third of their 36-month records, the funds haven't as a group demonstrated their superiority."