Are investors sacrificing performance by moving from active to passive funds? Last year, £23bn was pulled from equity mutual funds and ETFs by UK investors—the second highest redemption on record, surpassed only by 2022. This was a tale of two strategies, however, as actively managed equity funds lost £24.13m while index-trackers gained £525m—modest, but positive in the face of huge headwinds. This trend remained in 2024, as active equity funds shed £9bn while their passive peers enjoyed inflows of £8.54bn in the first half of the year. Passives have grown from 7.1% of UK mutual fund and ETF equity assets

First of all, it needs to be said that mutual funds and exchange traded funds (ETFs) are collective investment vehicles which are in many jurisdictions regulated within the same regulatory framework. This means both kinds of products are different ways to deliver an investment strategy to the investor. The key differences between a mutual fund and an ETF are related to their product structure, buying and selling of shares, transparency, and fees and expenses: 1. Buying and Selling of Shares The shares of mutual funds are normally bought and sold only once a day, at the fund’s net asset value

Given the current economic situation around the globe it was no surprise that the European fund industry faced declining assets under management over the course of the year 2022 so far, as the geopolitical situation in Europe, the still ongoing COVID-19 pandemic, disrupted delivery chains, increasing inflation, and interest rate hikes put some pressure on the securities markets. Within this environment, the assets under management in the European fund industry decreased from €15.3 tr (as of December 31, 2021) to €13.3 tr at the end of Q3 2022. While ETFs held €1.2 tr, or 9.23% of the assets under management

Sustainability-oriented investors should expect to find some unexpected holdings in their portfolio when they choose products with a swap-based (synthetic) index replication approach. While index products with a full replication approach hold normally only the constituents of their respective index, the portfolio of a synthetic product is built with a swap that replicates the risk/return profile of the respective index and the so-called collateral. The securities held as collateral are often chosen based on their liquidity and transaction costs, as this helps to minimize the costs of managing the product. If the securities for the collateral are not chosen with

As ETFs become increasingly successful in gathering assets from ESG-oriented investors, it is no surprise that active managers have started to claim that serious ESG strategies need active management. Since we know that similar claims from active managers over plain vanilla ETFs have been proven wrong in the past, one has to check if the new claims are true. One of the major claims of the critiques is the fact that ESG indices, which are the basis for ESG ETFs, review their constituents only a few times a year and can’t in most cases react directly to controversies or scandals.

Looking back on the year 2020, it can be said that no investor has seen such a year before, even if one looks back to the Great Depression or World Wars I and II. The year started off with fears about a possible war between North Korea and the U.S., an upcoming trade war between the U.S. and China, and a possible hard Brexit. In a normal year, these geopolitical tensions would have put enough pressure on the markets to cause a major downturn. But in mid-February the coronavirus, which has been seen as a local problem in China before,

Despite the market turbulence caused by the outbreak of the novel coronavirus and the following COVID-19 pandemic induced lockdowns of economies around the globe, the year 2020 seems to be a successful year for the European fund industry. Even as the final numbers are not accounted yet, it looks like 2020 will be the year with the second highest overall inflows into mutual funds and exchange-traded funds (ETFs) in Europe (€449.69 bn as of November 30, 2020). That said, not all fund promoters in Europe might agree with this view, as the year showed strong fund flow trends which didn’t

As the coronavirus started to spread, the global equity markets faced heavy loses. Then the price for oil dropped to levels last seen in the 1950s. Under these circumstances, investors want to know if their fund managers have produced an outperformance compared to the broad equity markets or not. With the trend towards ESG funds, it might be a topic of interest to evaluate whether funds that integrate ESG criteria in their portfolio management process have shown an outperformance compared to the market benchmarks and their conventional peers. To answer these questions, we ran an analysis by comparing the performance

With the rise of ETFs, index mutual funds had been out favour with European investors until the year 2015. But even as index funds got some positive momentum since 2016, ETFs still experienced higher inflows. While I was analysing the year-to-date flows at the end of August, I was surprised that index funds (+€52.5 bn) enjoyed higher estimated net inflows than ETFs (+€42.8 bn), as this means that index funds have been the passive investment vehicle of choice for European investors so far for 2019. If this trend continues until the end of the year, they will beat ETFs in

  During the Refinitiv ETF Academy on July 3, 2019, Andrew Walsh, Executive Director, Head Passive & ETF Specialist Sales – U.K. & Ireland at UBS AM, gave a presentation called “Are you making the most of passive investing?” Since he gave a number of hints on how to research exchange-traded funds (ETFs), I thought it would be a good idea to revisit his points because the increasing number of ETF promoters and indices can lead to a steadily growing number of ETFs in the market. The increased competition, especially for “plain vanilla” products, has led to falling prices in

Given that we have witnessed many headlines concerning passive investing and the popularity of ETFs, confirmed by the inflows and increasing assets under management in the European ETF industry, one could conclude that European investors like index products. It seems European investors follow the academic research and invest in products that appear from the scientific evidence to be superior at helping them achieve their investment goals. But a look at the underlying trends shows that Europeans don’t like all kinds of index products. Mutual funds that track an index seem to no longer be in the favor of European investors.