After what seems like every retail investor–including Warren Buffett’s wife–has bought in to the index investing mania, it appears the tide may be turning once again in favor of active management. Attracta Mooney writes for the Financial Times:
Assets managed in passive mutual funds grew 4.5 times faster than active in 2016 to reach $6.7tn, according to figures from Morningstar, the data provider.
On the back of this rapid growth, Moody’s, the rating agency, predicted in February that passive would overtake active management by 2024 in the US at the latest, controlling half the market, up from 28.5 per cent today.
But in the months since that Moody’s forecast, the active management industry appears to have staged a turnround, closing the gap on the passive industry’s rapid growth. Passive funds attracted 1.4 times the level of new cash as active funds for the six months to the end of June, at $509bn compared with $369bn.
That is in stark contrast to 2016, when passive funds attracted 5.1 times more new cash than active, according to Morningstar.
“Active managers seem to be mounting a counterattack, particularly in the US,” says Jose Garcia-Zarate, associate director of passive strategies research at Morningstar.
The question is whether active managers can maintain this momentum.
Read more here.
Jeremy Jones, CFA
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