In July, Morningstar reported that actively managed mutual fundssuffered their worst 12-year period of outflows ever.

U.S focused funds saw $156 billion flow out in that period,while passively managed funds that trackedthe S&P 500, Nasdaq, and Russell 1000 indices gained $150billion of inflows.

The exodus continued in August: $14 billion flowed out ofactively managed U.S. equity funds, while $5 billion flowed intoindex funds.

In spite of the continued hemorrhaging, a new study fromAmerican Funds suggests retirementinvestors can vastly extend the life of their savings with activelymanaged funds, so long as the right funds are chosen.

The study cites what it calls three critical factors inassessing the value proposition of actively managed funds:

• low expense ratios

• a high level of investment in the funds by its managers

• whether or not the funds outperformed indexes during marketdownturns

The study compared two hypothetical portfolios of activelymanaged funds that met the three critical factors with portfoliosbuilt on passively managed index funds.

Read: Betterment takes aim at 401(k)market

A 65-year old investor retiring in 1995 with $500,000 in savingswho began withdrawing 4 percent, and increased annual withdrawal by3 percent each year after to account for inflation, would havegenerated 85 percent more wealth in one active model compared to aninvestor in a passively managed portfolio, according to thestudy.

In one scenario, the investor would have been able to withdraw$537,000 by year-end 2014—a 20-year period—and still have $1.7million remaining in the actively managed account.

If invested in a passive index blend of comparable equities, theinvestor would only have about $908,000 in wealth after drawingdown $537,000 in assets over the 20-year period.

Independent research from Morningstar shows the least expensiveactively managed funds often performed well in the past year.

Large-cap actively managed funds with expense ratios below 30basis points beat the market 56 percent of the time, while fundswith expense ratios greater than 50 basis points only outperformedmarkets 40 percent of the time.

Morningstar’s research also shows that actively managed fundsthat invest in their own strategies also outperform those fundsthat don’t invest their own money.

“The right actively managed funds can be a strong value-add tomany 401K portfolios and some, including those from American Funds,have fees lower than many passively managed funds,” said SteveDeschenes, head of client analytics at Capital Group, which ownsAmerican Funds, in an email interview.

“It’s important to consider that passive funds will bear all thedownside of a market downturn which can be a serious setback forthose saving for or nearing retirement,” he added.

“Our new study shows that selecting actively managed funds witha low expense ratio, high manager ownership and a low downsidecapture have historically outpaced indexes and active peers in awithdrawal scenario. We encourage advisers to weigh thisinformation when making recommendations to companies and platformsof a good mix of 401K options for plan participants,” saidDeschenes.