Altogether, 2016 was a great year for value-minded fund companies—but one firm in particular dominates the world.
Funds offered by Valley Forge-based Vanguard had more net inflows than the rest of the fund industry combined, according to a recent report by Morningstar.
“The milestone was driven first by another strong year of flows for Vanguard funds,” said Morningstar editor Jeremy Glaser in a video report. “Second, there was a slowdown in flows into other firms.”
All told, in 2016 Vanguard took in $289 billion into its funds. Meanwhile, a total $533 billion of inflows went into funds across all companies.
Vanguard more than doubled the inflows of its nearest competitor. The firm is trailed in 2016 net inflows by BlackRock’s iShares brand, which took in $137 billion, and by State Street Global Advisors, who took in $63 billion across their fund business. Dimensional Funds ranked fourth with just under $25 billion in net inflows.
Vanguard’s domination took place in a year where it did not beat its own record for inflows. Vanguard’s best year was in 2014, when its funds posted an estimated $291 billion in net inflows, according to Morningstar. Still, 2016 brought Vanguard $43 billion more in inflows than 2015.
Across all other firms in the fund industry, net inflows have shrunk from $1 trillion in 2014 to only $244 billion in 2016.
Active mutual funds were among the worst suffering segments of the industry, posting $92.3 billion in net outflows, while passive index funds brought net inflows of $625 billion.
The move to lower cost funds has also made Vanguard the largest active fund manager in the world, according to a presentation at last month’s Inside ETFs conference by Tom Rampulla, Vanguard managing director.
Glaser credits Vanguard’s success to its low-cost funds. Citing research that links long-term performance to low fees, Morningstar argues that investors have caught on to Vanguard’s low-cost offerings as an easy way to harness that performance trend.