Global Investors Shift To Active Equity Funds Amid Market Volatility

Global investors are increasingly turning to actively managed equity funds in 2025, responding to heightened market volatility triggered by renewed U.S. tariffs and a broadening of the stock market rally beyond mega-cap tech names.

Data from LSEG Lipper shows that active equity funds attracted a record $127 billion in inflows during the first half of the year, a 57% surge compared to the same period in 2024. In contrast, passively managed equity funds recorded an 8% drop in inflows.

Passive investment strategies have dominated recent years, favored for their low fees and reliable returns. However, the landscape is shifting. Market disruptions, including tariff policies under U.S. President Donald Trump and escalating geopolitical tensions, are prompting investors to seek the strategic flexibility of active management.

The current environment of sectoral and stock-level divergence is opening the door for active managers to outperform particularly those targeting companies with robust pricing power, diverse revenue streams, and stable supply chains.

A recent Natixis Investment Managers survey revealed that 71% of strategists anticipate continued equity market volatility, with 68% expecting similar turbulence in bond markets. Despite this, a majority see opportunity: 71% of respondents are eyeing equities for returns, while 74% are looking to fixed income.

“Simply tracking an index may no longer deliver the diversification or downside protection investors assume,” said Joseph Shaposhnik, portfolio manager at Rainwater Equity. “Active managers who maintain valuation discipline and prudent capital allocation have largely avoided crowded, overvalued sectors, contributing to net outperformance this year.”

According to LSEG, global equity gains in 2025 have been led by the financial, telecom, and mining sectors, each posting returns of 10% or more. Meanwhile, the technology sector which has led in previous years has underperformed, with returns of just 8.6%.

Chad Harmer, chief investment officer at Harmer Wealth Management, noted that the top 10 stocks in the S&P 500 now represent nearly 35% of the index’s total market capitalization, an imbalance that historically precedes underperformance.

“When market leadership narrows, index investors unknowingly assume increased single-stock risk,” Harmer said. “Active managers are better positioned to mitigate that risk or to allocate capital into undervalued segments of the market.”