Actively managed funds have been underperforming the broader markets and witnessed investor assets shift over to passive exchange traded funds. Now, large pension funds are beginning to make the move as well.

The California Public Employees’ Retirement System, which holds $255 billion in assets with over half already invested in passive strategies, is starting to review its active managers, InvestmentNews reports.

“It’s sort of an exclamation mark on a trend that most are aware of,” Chris McIsaac, managing director of the institutional investor group at Vanguard Group, said in the article.

Fidelity Investments has also been caught up in passive investments as the company partners with BlackRock to increase the number of commission-free iShares ETFs on its trading platform. [Fidelity, iShares Expand ETF Partnership: What Does it Mean?]

“We see don’t see it as either passive or active, we see it as both,” Scott Couto, president of Fidelity Financial Advisor Solutions. “In a low-return environment, fees matter a lot. That’s getting interest in passive investing over the short term.”

Beth Flynn, vice president and head of third-party ETF platform management at Schwab, which recently launched its commission-free OneSource ETF platform, also believes that fees will continue to have an effect on investment decisions. [Schwab Unveils Game-Changing Commission-Free ETF Platform]

“There will continue to be a growing interest in the passive side because cost matters to investors,” Flynn said in the article. “Virtually all our adviser clients use ETFs in some way, shape or form.”

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