Active Mutual Fund and ETF Market Share on the Decline

The market share of actively managed mutual funds and exchange-traded funds (ETFs) has been on the decline in recent years, falling from 77% in 2011 to 69% in 2015, according to Cerulli Associates.

Nearly one-third, 31%, of mutual fund and ETF assets were invested in passive strategies in 2015, up from 23% in 2011.

“Investors are questioning active’s value,” says Pamela DeBolt, associate director at Cerulli. In addition, “fee pressure from intermediaries remains prevalent. Active managers find themselves at a crossroads. They need to determine how to provide alpha in an environment in which the simplicity and low cost of passive appeals to investors and advisers.

“Creating products that compete with low-cost passive offerings, such as strategic beta—a hybrid investment approach between active and passive—appeals to active managers that struggle philosophically with managing both active and pure passive,” DeBolt continues. “In addition, some managers are focusing on other parts of their product line or capabilities, such as alternatives multi-asset-class solutions, target-date funds and asset allocation vehicles.”

Cerulli’s report, “U.S. Products and Strategies 2016: Identifying Opportunities for Active Management,” examines strategies for active managers;  trends in mutual fund share classes and pricing; exchange-traded funds; strategic beta; environmental, social and governance (ESG) and socially responsible investing (SRI); financial advisers’ product preferences; the institutional and retail product landscapes; and innovations in target-date funds. 

Information on obtaining Cerulli research is here.