On a recent episode of the DWS’ Insights Lab podcast, Luke Oliver, Head of Systematic Investment Solutions for the Americas, for DWS, discussed the rise of index investing, how DWS creates new ETFs, and what may be next for the industry. Host Rob Bush, Head of U.S. Product Strategy for DWS, gets to the heart of it by having Oliver delve into what’s been driving this rising trend and how it can continue.

Oliver makes it clear that this is sure to continue, and it could be relatively early in this trend. However, it may be more worth noting that the shift toward passive is an evolution, as opposed to moving from one methodology to another. It’s coming down to the shifts in different investing appeals, as people start to think about low-cost core and adding alpha around it or using research to determine how to proceed. There are also industries shifting their models to account for these changes, using passive as a building block for asset allocation.

“There are so many uses of passive,” Oliver states while also noting the ETF wrapper, which allows for active, passive, alt, and more to better incorporate all that one wants. This leads to many different sorts of benefits, including tax efficiency, earning, and more. All of this works to show the versatility of the ETF while making it clear what passive can accomplish.

More Than A Passive Decision

As far as the different ways to track indexes, Oliver explains how there are many ways of accessing the market, including mutual funds, for example. “Passive mutual funds are about the same size in assets as the whole ETF market,” making it clear that the passive trend has seen both wrappers.

Many institutions don’t rely on ETFs at all, choosing a direct asset allocation instead, which can be price efficient, remaining passive, with the allowance to maintain exposure. This applies to companies that want to be passive in line with the market but may want to have a portfolio structure that better suits their investor base. For DWS, Oliver notes how they can accommodate companies taking this approach, which includes a rise in ESG, and how that can help apply to things like currency hedging.

The rest of the podcast delves further into the DWS approach to index investing and the proper way of identifying the varying strategies.

Listen To Luke Oliver On DWS’ Insight Lab Podcast:

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