I was asked to comment in today’s Ignites (a Financial Times Service) about the results of a poll which indicated that many mutual fund industry pros are investing their own money in passive investments (such as ETFs). More than two-thirds of respondents indicated that they have a sizable portion of their own assets in passive investments.
These results are not surprising given the outflows that many active funds have seen as well as the negative press active management has received over the past few years, largely the result of so many of these funds underperforming their benchmarks. Industry professionals are in essence practicing what they preach – investing their own assets in a fashion similar to how they are investing their client’s assets. To quote from the article:
“Andy Klausner, founder and principal of AK Advisory Partners, says it “seems reasonable” that nearly 70% of industry participants have at least some assets in passive investments. Still, it is “hard to know exactly what percent of their personal assets are in passive investments,” he notes.”
Active management is far from dead, however. I believe that there will always be a segment of the profession that stays away from passive management, so I wouldn’t expect this percentage to increase significantly over time. Again, from the article:
“However, given some professionals’ personal preference for active management, experts do not expect many of those who are now abstaining from passive to be swayed in the future. Both Klausner and Dannemiller anticipate that the percentage of assets fund professionals invest in passive products expressed in Tuesday’s Ignites poll will stay about the same over time.”
Tags: active management, ETFs, passive management
