“This is not sort of an evolution in the active/passive debate,” Johnson said. “We’re beginning to realize that all investors are active…. What we’re seeing is that the objects of their active decisions are changing.”
Specifically, more investors are actively looking to various cheap, efficient ETFs as a passive investment vehicle to gain exposure to many markets across the globe.
“A bigger number of investors are making active use of these passive building blocks everyday,” Johnson said.
More recently, with the advent and proliferation of alternative index-based ETF strategies that screen for specific factors, the dividing line between active and passive has become increasingly blurred.
“What you see too, in terms of activity in the product development level, is that active is showing up wearing sort of passive clothes, so strategic-beta, smart-beta, factor funds,” Johnson said. “Whatever you want to call it is really just an active decision making framework that’s been baked into an index wrapped up in an ETF.”