Index equity mutual funds saw average losses of 39.1% last year, while actively managed funds lost an average of 40.5%, according to Morningstar.
Seeing little difference in performance between actively managed and index funds, many investors are opting for lower fees and are shifting assets away from active management.
"Some people who get their hands burned by these market drops move from active to passive, and every time some of them stay there," Scott Burns, an analyst at Morningstar, told Dow Jones.
Actively managed equity funds saw $221.8 billion in net outflows in 2008, ending the year at $3.2 trillion, while index funds had net inflows of $17.6 billion, ending 2008 with $490 billion in assets under management, according to data from Lipper.
"It could be that some people are adopting [Vanguard founder] Jack Bogle's long-held advice of not buying too many funds, staying well-diversified and keeping costs low," said Tom Roseen, a senior analyst at Lipper. "Perhaps they've just said to themselves, 'We do know that actively managed funds can win, but not all the time, so let's just shift to indexing.'"