The latest fund flows data from Morningstar tells a sobering tale for active fund houses, with 12 consecutive months of net outflows. But wealth managers continue to focus on active equity funds across all asset classes except the US.

The Morningstar data shows £3.2bn was pulled from active UK domiciled funds in January, while passive strategies had a net inflow of £2.5bn during the first month of the year. 

But a glance at Asset Allocator's proprietary database shows it is only in the US equity category that the most-owned fund is a passive strategy, indeed three of the four most owned US equity funds among the allocators we cover are passives, with Fidelity Index US appearing in 12 portfolios, and Legal & General’s US Index fund appearing in six of the portfolios we monitor. 

The sole US active equity fund among the top four is Dodge & Cox’s Worldwide US Stock fund, which appears in nine portfolios. 

It has returned 31 per cent over the past three years, compared with a peer group average of 21 per cent. 

Only one of the top four funds in the UK growth sector is a passive, while none of the most owned UK equity income or Japanese equity funds is a passive.

Two of the top four most owned European equity funds are passive. 

Passive funds are much more common among bond funds where three gilt funds are active while 10 are passive. It is a similar story among index-linked bond funds and short-duration bond funds.

In both of those cases, a fund buyer is not taking credit risk, so there is less potential for an active fund manager to add value. 

Back to the Morningstar data, the bulk of the inflows across all asset classes were to Global and US large cap funds, while investors withdrew £457mn from UK all cap equity funds and £348mn from UK Corporate bond funds.