Flows from active to passive are accelerating

Posted by TEBI on July 8, 2019

Flows from active to passive are accelerating

 

Investors in the US and Europe are deserting actively managed funds at the fastest rate since 2016, according to new figures from Morningstar.

Active funds based in Europe suffered redemptions of almost €21 billion in the five months to the end of May. Meanwhile, US investors pulled almost  $13 billion from active funds in the same period.

Meanwhile, the increasing popularity of passive investing continues unabated on both sides of the Atlantic. In the US, index funds now account for 37.5% of market share in the US — up 2% on a year ago. Passive’s market share in Europe has risen from 16.6% to 18.3% in the same period.

Data from the fund transaction network Calastone point to a particularly strong trend away from active management in the UK. Investors pulled almost £2 billion from UK-domiciled active funds in June.

Calastone spokesman Edward Glyn told the FT that negative publicity surrounding high-profile active funds is a contributing factor. Neil Woodford, Britain’s best-known active manager, courted controversy when he suspended trading in his flagship equity income fund on 3rd June, after a long run of consistently poor performance.

Alan Miller from SCM Direct, a longstanding campaigner for greater transparency in the asset management industry, told the newspaper: “The shift to passive is accelerating as more (people) discover the simple maths.

“Over the long term, simply because of lower costs, a typical index fund offers greater performance with less volatility, more diversification and better liquidity.”

 

 

Picture: Jeremy Bishop via Unsplash

 

 

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