The Stampede From Active Management To Passive Investments
December 6, 2016
Over the last decade, we have seen a massive shift on the part of investors away from so-called “actively-managed” mutual funds and exchange-traded funds (ETFs) and into so-called “passively-managed” funds – also referred to as “index” funds.
Over the three years ended August 31 alone, investors added nearly $400 billion to passive mutual funds and ETFs while draining more than $400 billion from active funds, according to data from Morningstar, Inc. That’s huge!
While the majority of mutual funds continues to be of the active-management style, that is rapidly changing. The question is whether the stampede from actively-managed to passively-managed funds is a good thing or not.