Monday, January 6, 2020

Why passive funds appeal more to institutions than individuals

The active versus passive debate has been raging for a while. Purists on both sides claim that their way is better and provide data which back their claims. One startling aspect of the debate is that most purists believe their side of the spectrum suits all investors equally. However, investor behaviour depicts a clear divide between institutions and individuals.

It is an undeniable fact that Exchange Traded Funds (ETFs) have been growing at a much faster pace than actively managed funds and consequently, commanding a larger share of equity assets managed by the MF industry. From a 0.5 percent share of industry assets on October 2014 to more than 6 percent in October 2019, it has been the fastest growing segment in the industry. In the past 2 years, it has accounted for more than 20 percent of industry growth. However, this growth has come largely on the back of institutional investments rather than those from individual investors, who have continued to invest in actively managed funds. And it is this dichotomy that needs further exploration.

To read more click here

This note was first published on on January 03, 2020

No comments:

Post a Comment