The one area that is an exception now is the large-cap value fund. Over the past five years, more than 60 % of active funds in that category beat the S&P 500 Value index. Last year the gap was closed, with about 27% outperforming. [PIMCO Total Return Hits $3 Billion in Assets]
“ETF product offerings should continue to expand and gain market share,” RBC analyst Eric Berg wrote in a report released on Tuesday. “We believe that this will come at the expense of actively managed funds.” [Ongoing Shift to Fee-Based Advisor Model Supports ETFs]
The continual focus on investment fees is another boost to passive management. Active management is much more expensive than passive index tracking, and with so many ETFs offered at a low rate, investors are drawn to these vehicles. As more investors realize that fees are a drag on performance, mutual funds will remain under a certain amount of pressure.
Tisha Guerrero contributed to this article.