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Investors don't hate fund managers, just U.S. stock-pickers

Investors haven’t soured on all active fund managers ― only those who pick U.S. stocks.

Actively managed mutual funds and ETFs that own domestic stocks experienced $98.5 billion in net redemptions in the first six months of 2017, according to the latest figures compiled by Morningstar. Active funds that buy international stocks attracted inflows of $8.7 billion and active funds that buy bonds gathered $106.5 billion.

“The trend for U.S. stocks funds keeps going and going,” said Russel Kinnel, director of manager research at Morningstar. “There is a perception that they can’t beat their benchmarks, especially when it comes to large-cap stocks.”

New York Stock Exchange exterior shot with flags draped over it Bloomberg News July 2017
A pedestrian views a mobile device while walking past an American flag displayed outside of the New York Stock Exchange (NYSE) in New York, U.S., on Monday, July 3, 2017. U.S. stocks rose in light trading and the dollar strengthened as factory data bolstered optimism in the strength of the American economy. Crude climbed for an eighth day. Photographer: Michael Nagle/Bloomberg

Passive mutual funds and ETFs remain popular across the board. Those funds had inflows of $394.1 billion in the first six months of the year, while active funds as a group saw net redemptions of $6.8 billion. The trend has benefited the two biggest money managers, BlackRock and Vanguard, both of which are best known for their passive products.

Some active mangers such as Fidelity Investments have added a lineup of passive funds to attract money while others like T. Rowe Price have doubled down on stock picking, betting their performance can help them buck the trend.

Investors gravitating toward passive strategies have increasingly bought ETFs, which track indexes and trade throughout the day like stocks. U.S. ETFs attracted $246.3 billion in the first six months of this year, not far from the record $286 billion they received in 2016, according to data compiled by Bloomberg.