As Investors Flee Active Funds, Will it Become Easier for Active Managers to Outperform?

One of the more frequently asked questions I receive as the director of research for The BAM ALLIANCE is whether, as investors abandon active mutual funds, it will become easier for active managers to outperform.

The trend toward passive investing has been inexorable, although slow, for the past 20 years, with roughly 1% of active investors abandoning the game of active management annually. Perhaps we have reached what might be called the tipping point, with the trend now accelerating. Consider that in the first 10 months of 2015, the four fund families with the largest growth in assets under management are all either best known for their passive investments or exclusively offer passive funds.

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