Persistent underperformance by active managers is spurring the growth of passive index funds and ETFs. A study of 4,600 U.S.-based equity, bond, and real estate funds with a collective $12.8 trillion in AUM revealed that only 24% beat passive alternatives during the 10 years ending Dec. 31, 2018, per Morningstar Inc. The same study found that passively-managed large cap equity mutual funds and ETFs surpassed active funds in AUM for the first time, as of the same date.
While ETFs are mainly viewed as a low-cost vehicle for individual investors, they also are gaining traction with institutional investors. Nearly 25% of institutional money managers’ portfolios were in ETFs by late 2018, per research by Greenwich Associates. Professional investment managers are increasingly seeing ETFs as a cost-efficient tool for managing risk and making quick portfolio shifts….CLICK for complete article