The move from active to passive investment strategies may have accelerated due to the pandemic, but the trend started long before Covid-19 devastated the market and will be in place when it fades, said two directors from Broadridge Financial Solutions in Lake Success, N.Y.

Investments tanked during the first part of 2020, but actively managed accounts saw a larger outflow of funds than ETFs or index funds, said Andrew Guillette, senior director of distribution insights, and Jeff Tjornehoj, director of fund insights, in an interview with Financial Advisor magazine. Active mutual funds suffered outflows of $228 billion in the first quarter of 2020 while ETFs saw inflows of $20 billion.

As of the end of the first quarter, slightly more than half, or $6.6 trillion, of the assets in the $11.8 trillion retail channel were managed actively. Another 44% were in passive investments, with index mutual funds accounting for $1.8 trillion and ETFs making up $3.4 trillion.

“Active managers have struggled over the last few years to attract new money as ETFs have grown,” Tjornehoj said. “The old model of active management has eroded as advisors now want access to low cost ETFs. Advisors will switch to passive investments in the blink of an eye now.”

“There is a new dynamic now to gain access to passive products,” added Guillette.

“In March, everybody was running for cover, but we saw the outflows for passive investments were rather quiet, while there were large outflows for active management,” Tjornehoj added. The trend will continue because investors are thinking that if active managers missed the first quarter downturn, they may also misjudge when the market will come back, he said.

Bonds also are an important part of the economy and investments, but “we have an equity culture in the United States and many investors do not see debt as a viable part of investments,” Tjornehoj said.

During the pandemic, investors sought the stability of cash, which was reflected in the growth of money market funds, Guillette said, adding that those investors will want to re-enter the market eventually.