The ongoing shift to low-cost strategies is attributed to shareholders’ preference for passively run funds, which typically have lower fees.
“Investors are questioning active’s value, and fee pressure from intermediaries remains prevalent,” Pamela DeBolt, associate director at Cerulli, told IBD. “Active managers find themselves at a crossroads. They need to determine how to provide alpha in an environment in which the simplicity and low cost of passive appeals to investors and advisors.”
Related: How to Pick ETFs as Fee War Heats Up
Within the ETF space, we have witnessed an increased preference for low-cost strategies, with the cheap Vanguard ETFs attracting huge inflows in recent years and becoming the second-largest U.S. ETF provider by assets. Other fund providers, though, have not sat idly by. More are cutting fees in response, fueling an ongoing fee war in the ETF space, in a bid to attract investments.
For more information on the ETF industry, visit our current affairs category.