The strong growth in passive investing that we have seen in the last decade continued in 2016. According to a recent report from Broadridge Financial Solutions Inc., “The usage of passive investment products, ETFs and index funds, hits all-time highs in 2016.”
The report acknowledged that 85% (more than $610 billion) of the new asset flows through “third party channels” such as brokers, registered investment advisors, and banks went into index funds or passive ETFs, further narrowing the overall gap between assets that are actively managed and passively managed. Since IFA has been educating investors for 18 years on this concept, this is music to our ears as many investors and professionals are starting to come to realize that adopting a lower-cost, passive approach to their personal investing is a more prudent strategy than the active approach that has dominated the industry for decades.
The Majority of New Fund Flows Went to Passive:
85%, or $610 billion, of new fund flows went into passively managed index funds or ETFs.
The Split Between Active and Passive Assets Continues to Narrow
Third party channels (brokers, RIAs, banks) now have 36.3% of their entire asset base invested in passively managed strategies. This is up 3.7% compared to the previous year.
About the Authors
Tom Allen is an Accredited Investment Fiduciary (AIF®), Certified Cash Balance Consultant (CBC) and a Chartered Financial Analyst (CFA®) Level III Candidate. Tom received his Bachelor of Science in Management Science as well as his Bachelor of Art in Philosophy from the University of California, San Diego.
Mark Hebner - Founder, Index Fund Advisors, Inc.
Founder and President of Index Fund Advisors, Inc., and author of Index Funds: The 12-Step Recovery Program for Active Investors. He is a Wealth Advisor, with an MBA from the University of California at Irvine and a BS in Pharmacy from the University of New Mexico with a specialization in Nuclear Pharmacy.