Passive investments have seen a 73 percent increase over a six-year period to 2015, according to latest research from S&P Global.
Pointing to an increase from 11 percent of global assets under management (AUM) in 2009 to 19 percent in 2015 for passive funds, which tracks a market-weighted index or portfolio, the research includes both exchange-traded funds (ETFs) and index funds.
The report, by Angana Jacob, associate director at S&P Dow Jones Indices, shows that ETFs have been growing at an annual growth rate of approximately 25 percent over the past decade, with AUM standing above $3 trillion (£2.2 trillion). This can be seen across both retail and institutional investments. "Institutions too are increasingly using ETFs for core exposures and access to smart beta strategies."
The active-passive debate has been raging across the investment industry especially for customers who want to avoid the hassle of cherry-picking stocks and paying massive fees to traditional active fund managers. In a passive form of investing, the fund manager makes very minor adjustments in order to keep the fund in line with its index. These indices are based on various market sectors such as commodities, healthcare, financials among others. But it is the low cost structure of these funds as compared to actively managed that make them attractive to investors.