Published inFUNDfire – An Information Service of Money-Media, a Financial Times Company
By Gregory Shulas
Institutional investors’ increased appetite for passive products will only grow stronger in thecoming months as interest in active management continues to wane. That’s according to FundFire poll respondents.
Roughly 57%, or 212 voters, said passive strategies will have the most momentum in the near future. That made it the most popular sentiment in a FundFire poll querying readers on whether active managers will continue to lose business to their passive counterparts in the coming quarters.
The majority tally includes 14%, or 52 voters, who said passive will have a “significant” advantage in the near future. It also includes 43%, or 160 voters, who said a “moderate” amount of investors will make the active-to-passive switch. That latter choice was the survey’s most popular individual option.
In contrast, 43%, or 162 voters, indicated that investors will remain loyal, if not increasingly committed, to active management in the months ahead.
The minority tally includes 21%, or 80 voters, who see no change from before, as well as 22%, or 82 voters, who expect investors will actually emphasize active management over passive management in the near future.
FundFire has reported on how institutional investors have displayed an increased interest in passive products in the past several months. For example, the San Jose (Calif.) Police and Fire Department Retirement Plan recently decided to move more than $250 million worth of largecap equities into passive products as part of a larger asset allocation shift. Meanwhile, a recent survey from Greenwich Associates found that one in five investors have relocated money away from active managers, up from 4% last year. Further, the California State Teachers’ Retirement System has been debating the merits of active versus passive management.
Andy Klausner, founder of AK Advisory Partners, a strategic consultancy serving asset managers and advisors, says he’s not surprised by the poll’s results due to how many industry professionals are still “shell-shocked” from the past year’s events.
“One popular theme has been that active no longer works and that passive makes more sense. However, I think that this is more of a reactive mentality,” he says. “Especially since the markets have come back, I would have expected a little more support for the active side. What is probably clouding the issue is the fact that even though markets have rebounded, the general economy is not doing that well so people are still nervous.”
As of 3 p.m. Tuesday, 374 voters had taken part in the FundFire survey.
Participants were self-selected and only able to vote once. The survey is an unscientific sampling of FundFire’s audience, which consists of asset managers, institutional investors, consultants, financial advisors and service providers.
