The workhorse of equity investing – mutual fund – is probably past its prime. There are forces at work that may relegate the actively managed mutual fund to being largely a retail investor’s instrument, next to the trusted insurance-cum-investment policy. Savvier investors are likely to move on.
Passive is in – the Indexing Revolution
September 2019 was a turning point in the history of money management. The AUM (assets under management) of passively managed funds in the US crossed that of the active schemes for the first time. Looking at the AUM alone may mislead one into thinking that these two modes of investing are now equals. Far from it! The flows into actively managed funds over the last 10 years have been negative in all but one year. The opposite is true for passively managed funds – they saw inflows in each of the last 10 years. What is driving this steady march of passive funds?
