Passive investments, including ETFs and index funds, now add up to $6 trillion (€5.6 trillion) of assets globally, said Moody’s and predicted that in the US the share of passive could rise to over 50% of total assets under management (AUM) in four years.
Drivers of the trend include the inability of active funds in aggregate to deliver above average performance, and the room for more global growth in passive as emerging markets mature, Moody’s Investors Services said.
Moody’s makes the prediction that the market share of passive in the US could be over 50% in four years in a report called ‘Passive market share to overtake active in the US no later than 2024’.
As the report title suggests it could take seven years for passive assets to reach over 50% of total US AUM, but it could also be as soon as four years.
In 2016, US passive inflows totaled $505 billion, whereas outflows from actively managed funds were $340 billion, Moody’s said.
Moody’s did not give a figure for global AUM, including passive and active, to make sense of the $6 trillion passive figure, but Morningstar estimates that total assets under management, including money market funds, were $30.650 trillion at the end of 2016.
Stephen Tu, Moody's senior analyst said: “Investor adoption of passive and low-cost investment products will continue irrespective of market environments, and we estimate that passive investments will overtake active market share by sometime between 2021 and 2024."
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