Catenaa, Wednesday, October 21, 2026- US active-equity funds recorded $574 billion in net outflows in 2025, compared with $464 billion in 2024, a McKinsey study finds.
The McKinsey report said active equity strategies, by and large, continue to struggle against their benchmarks despite greater dispersion in underlying securities, while active fixed-income strategies have delivered stronger relative results across several categories and have been rewarded with flows.”
“Rather than simply choosing passive over active, investors are increasingly making more discriminating judgments about where active management is worth paying for,” McKinsey said.
The McKinsey report, led by Strategist Ben Ma and others, suggests that investors increasingly favor low-cost products that track market performance while reserving higher management fees for strategies capable of delivering differentiated returns. This shift is pressuring traditional investment products that struggle to demonstrate their value.
According to McKinsey, passive equity remains one of the industry’s largest flow engines, while active fixed income is enjoying an exceptionally strong period of demand
The McKinsey report also found that passive-equity funds attracted $200 billion and active fixed-income funds attracted $377 billion, and that investors are becoming more selective about where active management justifies its fees.
McKinsey found that overall investment flows remained resilient, although investors were becoming more selective when allocating money across fund categories.
In the Americas, flows into asset management have remained steady, with retail investors accounting for roughly 85% of net flows, McKinsey said.
“Continued wealth creation—particularly among higher wealth bands—has supported demand even amid periods of macroeconomic uncertainty,” the report revealed.
McKinsey also said the barbell is most pronounced in the United States. Europe’s flow mix remains more heavily oriented toward active fixed income and money market funds, while passive-equity penetration, although rising, remains well below US levels (15% in Europe versus 24% in the United States).
According to McKinsey, some of the strength in active fixed income reflects the attractive opportunity set for managers navigating duration and credit risk, but much of it is also mechanical.
The report revealed that strong equity-market appreciation pushed portfolio weights above their targets, prompting investors to rebalance back toward fixed income.
“Passive fixed income is also growing, making bonds one of the few areas in which active and passive strategies could expand together. Active equity remains the outlier, with persistent outflows from traditional mutual fund vehicles. Performance helps explain some of the pattern.” McKinsey said.
