More investors want index-based investments and exchange traded funds, favoring passive fund products over actively managed strategies.
Passively managed stock and bond funds attracted $336 billion in new inflows over 2013, beating out the $53 billion in new inflows traditional mutual funds experienced, reports Kirsten Grind for the Wall Street Journal.
Over the first seven months of this year, investors piled another $177 billion into those passive funds while actively managed funds brought in $74 billion. Passive stock funds saw $128.4 billion in inflows, whereas traditional stock funds added $18 billion.
It is “a trend that I see continuing on, probably forever,” David Barse, chief executive officer at Third Avenue Management, said in the article.
Cost and fund fees have been a key contributing factor to the shift into passive index funds. According to XTF data, U.S.-listed passive index-based ETFs have an average 0.57% expense ratio, compared to 1.3% for actively managed stock funds. [High Active Fund Fees Make Passive ETFs Look Attractive]
Vanguard, which now has almost $3 trillion in assets under management for the first time, received a huge boost this year after Warren Buffett revealed his preference for low-cost index funds. [Vanguard Trims Fees on Nine ETFs]