---
title: The Diminishing Role of Active Mutual Funds: Flows and Returns
url: https://www.ml-quant.com/papers/ssrn/4539706/
site: ML-Quant (https://www.ml-quant.com)
updated: 2026-09-26
license: Summaries CC BY 4.0; links go to the original sources
index: https://www.ml-quant.com/llms.txt
identifier: SSRN 4539706
source_url: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4539706
featured: 2023-08-17
citations: 0
topic: Portfolio & Allocation
---


# The Diminishing Role of Active Mutual Funds: Flows and Returns

Flows & Returns: The research indicates that U.S. active equity mutual funds have seen net outflows since 2006, with the impact of these flows on the annualized alpha for the active funds industry turning negative between 2006 and 2021.

- Source: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4539706
- Identifier: SSRN 4539706
- Released: 2023-08-13
- First featured: Quant Letter No. 12 (2023-08-17): https://www.ml-quant.com/issues/2023-08-17/
- Citations (Semantic Scholar): 0
- Published in: not yet
- Topic: Portfolio & Allocation

## Related

- [Quantifying Outlierness of Funds from their Categories using Supervised Similarity](https://www.ml-quant.com/papers/arxiv/2308.06882/): The study uses machine learning to measure the impact of mutual fund miscategorization, revealing a significant link between outlier measures of funds and their future returns.
- [Displaced by Big Data: Evidence from Active Fund Managers](https://www.ml-quant.com/papers/ssrn/4527672/): The use of big data, like satellite imagery tracking firms' parking lots, can diminish the stock picking abilities of active mutual funds, implying that big data could replace high-skill workers in finance.
- [Ensembling Arimax Model in Algorithmic Investment Strategies on Commodities Market](https://www.ml-quant.com/papers/ssrn/4577441/): ARIMAX/ARIMAX-Garch models are ineffective for making buy or sell decisions for selected commodity baskets, as per a study on four Invesco ETF funds.
- [Political Connections, Corruption, and Investment Decisions of Chinese Mutual Funds](https://www.ml-quant.com/papers/ssrn/4586940/): A study finds a direct correlation between Chinese mutual funds' political ties and their investment choices, with these influences decreasing after the 2012 anti-corruption campaign, implying such campaigns can improve market fairness.
- [Remeasuring Scale in Active Management](https://www.ml-quant.com/papers/ssrn/4599484/): The study suggests that previous research significantly overestimates the diminishing returns of mutual funds when considering additional institutional assets managed under the same strategy.
- [Talk vs. Walk: Lessons from Silent Sustainable Investing of Mutual Funds](https://www.ml-quant.com/papers/ssrn/4602285/): Talk vs. Walk: The study finds that investors favor internal ESG labels over external sustainability ratings, significantly influencing fund flows, but high sustainability rating funds don't necessarily rebrand as ESG funds due to regulatory pressure and limited benefits.