BlackRock is ditching human managers in some of its actively managed funds in favor of technology-driven strategies.
"Its traditional active funds have struggled and it recognizes that it is difficult for traditional stock selectors to consistently outperform," said Alex Bryan, director of passive strategies research at investment analysis firm Morningstar. "These changes should help cut costs and allow BlackRock to be more competitive on price."
You may benefit from BlackRock's move even if you aren't a client of the world's largest asset manager. Many industry analysts anticipate other fund companies will follow BlackRock's lead.
"We expect other firms to bring down fees both in response to active BlackRock products coming down in cost but also in acceptance that lower-cost products are being favored by advisors and investors," said Todd Rosenbluth, director of ETF and mutual fund research at CFRA.
BlackRock's change in strategy comes as investors are abandoning actively managed funds at a rapid clip. Active U.S. stock funds held $3.6 trillion in assets while their passive counterparts held nearly $3.1 trillion as of January, according to Morningstar. All classes of passive funds saw $563 billion in new contributions over the past year through January while active funds suffered $325.6 billion in withdrawals.